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



Date
of event requiring this shell company report ________



Commission
file number 001-37643



|Kitov
    Pharmaceuticals Holdings Ltd.                                                                                                                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Exact
    name of Registrant as specified in its charter)                                                                                                     
|                                                                                                                                                               
|N/A                                                                                                                                                            
|(Translation
    of Registrant’s name into English)                                                                                                            
|                                                                                                                                                               
|Israel                                                                                                                                                         
|(Jurisdiction
    of incorporation or organization)                                                                                                            
|                                                                                                                                                               
|One
                                         Azrieli Center, Round Tower, 23rd Floor,
        132
        Menachem Begin Road,Tel Aviv,
        6701101, Israel
|(Address
    of principal executive offices)                                                                                                                   
|                                                                                                                                                               
|Simcha
    Rock, Chief Financial Officer                                                                                                                       
|One
                                         Azrieli Center, Round Tower, 23rd Floor,
        132
        Menachem Begin Road,Tel Aviv,
        6701101, Israel
|Tel:
    +972-3-933-3121; Fax: +972-153-39333121                                                                                                               
|(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 class                                                   |  | Name
    of each exchange on which registered
|-------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                     |  |                                              
|American
Depositary Shares, each representing 20 Ordinary Shares (1) |  | NASDAQ
    Capital Market                    
|Ordinary
Shares, no par value (2)                                    |  | N/A                                          
|Warrants
    to purchase our American Depositary Shares              |  | NASDAQ
    Capital Market                    



|(1) | Evidenced
    by American Depositary Receipts.
|--- | ----------------------------------------------



|(2) | Not
    for trading, but only in connection with the listing of the 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: 153,237,209 Ordinary Shares, no par value (including 21 shares held in treasury)



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 1934.



Yes
☐    No ☒



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



☒
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, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large
accelerated filer☐    Accelerated filer ☐



Non-accelerated
filer☐  (Do not check if a smaller reporting company)



Smaller
reporting company☐    Emerging growth company ☒



If
an emerging growth company, 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. ☐



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
Financing 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.



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.



Yes
☐    No ☐

















TABLE
OF CONTENTS



|ITEM
    1.   | IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        | 5  
|------------- | -------------------------------------------------------------------------------- | ---
|ITEM
    2.   | OFFER
    STATISTICS AND EXPECTED TIMETABLE                                      | 5  
|ITEM
    3.   | KEY
    INFORMATION                                                              | 5  
|ITEM
    4.   | INFORMATION
    ON THE COMPANY                                                   | 38 
|ITEM
    4A.  | UNRESOLVED
    STAFF COMMENTS                                                    | 68 
|ITEM
    5.   | OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS                                 | 68 
|ITEM
    6.   | DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES                                   | 76 
|ITEM
    7.   | MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            | 105
|ITEM
    8.   | FINANCIAL
    INFORMATION                                                        | 115
|ITEM
    9.   | THE
    OFFER AND LISTING                                                        | 119
|ITEM
    10.  | ADDITIONAL
    INFORMATION                                                       | 122
|ITEM
    11.  | QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 145
|ITEM
    12.  | DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 146
|ITEM
    13.  | DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES                              | 154
|ITEM
    14.  | MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 154
|ITEM
    15.  | CONTROLS
    AND PROCEDURES                                                      | 156
|ITEM
    16.  | [RESERVED]                                                                       | 157
|ITEM
    16A. | AUDIT
    COMMITTEE FINANCIAL EXPERT                                             | 157
|ITEM
    16B. | CODE
    OF ETHICS                                                               | 157
|ITEM
    16C. | PRINCIPAL
    ACCOUNTANT FEES AND SERVICES                                       | 157
|ITEM
    16D. | EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.                  | 158
|ITEM
    16E. | PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 158
|ITEM
    16F. | CHANGE
    IN REGISTRANT’S CERTIFYING ACCOUNTANT                                 | 158
|ITEM
    16G. | CORPORATE
    GOVERNANCE                                                         | 158
|ITEM
    16H. | MINE
    SAFETY DISCLOSURE                                                       | 161
|ITEM
    17.  | FINANCIAL
    STATEMENTS                                                         | 162
|ITEM
    18.  | FINANCIAL
    STATEMENTS                                                         | 162
|ITEM
    19.  | EXHIBITS                                                                         | 162














Unless the context otherwise indicates or requires, all references
to:



|● |  | the terms “Registrant,” “Company,”
“Group”, “we,” “us,” “our,” and similar designations refer to Kitov Pharmaceuticals
Holdings Ltd., together with its wholly-owned subsidiary, Kitov Pharmaceuticals, and its majority owned subsidiary, TyrNovo except
where otherwise stated or where it is clear that the terms mean only Kitov Pharmaceuticals Holdings Ltd. exclusive of its subsidiaries,
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● |  | “Kitov” refers to the Registrant, together
with its wholly-owned subsidiary, Kitov Pharmaceuticals,
|- |  | ---------------------------------------------------------------------------------------------------



|● |  | “Kitov Parent”, refers to the Registrant,
exclusive of its subsidiaries,
|- |  | ------------------------------------------------------------------------



|● |  | “Kitov Pharmaceuticals” refers to Kitov
Pharmaceuticals Ltd., the wholly owned subsidiary of the Registrant,
|- |  | ------------------------------------------------------------------------------------------------------------



|● |  | “TyrNovo” refers to TyrNovo Ltd., the majority
owned subsidiary of the Registrant,
|- |  | ----------------------------------------------------------------------------------



|● |  | the terms “shekels”, “Israeli shekels”
and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel,
|- |  | --------------------------------------------------------------------------------------------------------------------------



|● |  | the terms “dollar”, “US$” or
“$” refer to U.S. dollars, the lawful currency of the United States of America,
|- |  | ------------------------------------------------------------------------------------------------------------



|● |  | the terms “Euro” or “€”
refer to the Euro, the lawful currency of the European Union member states,
|- |  | ---------------------------------------------------------------------------------------------------



|● |  | “ordinary shares,” “our shares”
and similar expressions refer to the Registrant’s Ordinary Shares, no par value per share,
|- |  | --------------------------------------------------------------------------------------------------------------------------



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



|● |  | “public warrants” or “Series A warrants”
refer to the Registrant’s warrants listed on the NASDAQ Capital Market under the symbol KTOVW,
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------



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



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



|● |  | “NASDAQ” are to the NASDAQ Capital Market,
and
|- |  | ----------------------------------------------



|● |  | the “TASE” are to the Tel Aviv Stock Exchange.
|- |  | ----------------------------------------------

| |  | 
| |  | 



2






Glossary
of Industry Terms



Additionally,
for convenience, the following terms used in this Annual Report Form 20-F are defined as follows:



|“CMC”                                                      |  | Chemistry
    Manufacturing and Controls – The methods by which a drug substance and product are synthesized, purified, assayed,
    and packaged.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|“cGMP”                                                     |  | Current
    Good Manufacturing Practice - minimum requirements of the FDA and other regulatory authorities for the methods, facilities,
    and controls used in the manufacturing, processing, and packing of a drug product that is intended for human use to ensure
    that the product is safe for use and has the ingredients and strength that it claims to have.                                                                                                                                                                                                                                                                                           
|“Clinical”                                                 |  | Pertaining
    to human studies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|“Drug
    Product”                                         |  | For
    the purposes of this disclosure – a drug product that has been approved by the FDA for marketing and sales within the
    United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|“EGFR”                                                     |  | Epidermal
growth factor receptor (EGFR; ErbB-1; HER1 in humans) is a transmembrane protein that is a receptor for members of the epidermal
growth factor family (EGF family) of extracellular protein ligands.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|“FDA”                                                      |  | United
    States Food and Drug Administration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|“Formulation”                                              |  | All
    the active and inactive materials contained in a final medical product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|“Generic
                                         Product” |  | A
    product developed by others than the original innovator, yet contains the same active substance as the original product both
    qualitatively and quantitatively. Limits of the difference from the original product within which the product may be recognized
    by the regulations as generic are determined separately for each product by the related regulatory authorities during the
    approval process. Regulatory recognition of a product as a generic product is performed through the majority of approval procedures
    adapted to this type of product, which differ from the approval procedures applied to a new chemical entity (NCE).
|“HTN”                                                      |  | Hypertension.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|“IND”                                                      |  | Investigational
    New Drug (Application) – an application to test an experimental drug in human beings and that requires clearance
    by the FDA for clinical trials to be initiated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|“MAPK”                                                     |  | A
    mitogen-activated protein kinase (MAPK or MAP kinase) is a type of protein kinase that is specific to the amino acids serine,
    threonine, and tyrosine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|“mTOR”                                                     |  | A
class of drugs that inhibit the mechanistic target of rapamycin (mTOR), which is a serine/threonine-specific protein kinase that
belongs to the family of phosphatidylinositol- 3 kinase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|“NCE”                                                      |  | New
    Chemical Entity- a drug that contains no active moiety that has been approved by the FDA in any other application submitted
    under section 505(b) of the Federal Food, Drug, and Cosmetic Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|“NDA”                                                      |  | New
    Drug Application -an application submitted to the FDA to approve marketing a new drug.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|“PDX”                                                      |  | An
    animal model in which patient-derived tumor tissue at low passage are implanted in animals, used to conserve original tumor
    characteristics and to provide relevant predictive insights into clinical outcomes when evaluating new cancer therapies.                                                                                                                                                                                                                                                                                                                                                                                                    
|“Preclinical”                                              |  | Drug
    development studies performed outside of a living organism or cell, using living cells, or appropriate animal models. The
    studies begin before trials in humans and assess safety, toxicity, and efficacy. Since drug development is dynamic, Preclinical
    studies are performed throughout the drug development lifecycle.                                                                                                                                                                                                                                                                                                                        
|“Pharmacokinetics”
    “PK”                                |  | The
    study of the absorption, distribution, metabolism and excretion of a drug from the body; the pharmacokinetic indices provide,
    among other things, information on the extent and time of the patient’s exposure to the material. It is the study of how the
    body affects the drug.                                                                                                                                                                                                                                                                                                                                                                  
|“Therapeutic
    effect”                                   |  | Measurable
    and meaningful change in the clinical condition of patients, resulting from the use of a certain medical drug or preparation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       










3






FORWARD-LOOKING
STATEMENTS





Some of the statements under the sections entitled
“Item 3. Key Information — D. Risk Factors,” “Item 4. Information on the Company,” “Item 5.
Operating and Financial Review and Prospects” and elsewhere in this Annual Report on Form 20-F may include forward looking
statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results, performance or achievements expressed or implied
by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates”,
“believes”, “could”, “estimates”, “expects”, “intends”, “may”,
“plans”, “potential”, “predicts”, “projects”, “should”, “will”,
“would”, and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect
our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. In addition,
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. 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.





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 research, manufacturing, preclinical studies, clinical trials, and other therapeutic
    candidate development efforts, as well as the extent and number of additional studies that we may be required to conduct;                                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | our
    ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or
    clinical trials;                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | our
    receipt of regulatory clarity and approvals for our therapeutic candidates and the timing of other regulatory filings and
    approvals;                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | a
delay or rejection of an NDA for one or more of our therapeutic candidates;                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | the
    regulatory environment and changes in the health policies and regimes in the countries in which we operate including the impact
    of any change in regulation and legislation that could affect the pharmaceutical industry, and the difficulty of predicting
    actions of the FDA or any other applicable regulator of pharmaceutical products;
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | the
    research, manufacturing, preclinical and clinical development, commercialization, and market acceptance of our therapeutic
    candidates;                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                             
| | ● | our
    ability to successfully acquire, develop or commercialize our pharmaceutical products;                                                                                                                                                                                                                                                              



| | ● | our
    ability to establish and maintain corporate collaborations;
| | - | -------------------------------------------------------------------



| | ● | the
    interpretation of the properties and characteristics of our therapeutic candidates and of the results obtained with our therapeutic
    candidates in preclinical studies or clinical trials;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    implementation of our business model, strategic plans for our business and therapeutic candidates;
| | - | ----------------------------------------------------------------------------------------------------------



| | ● | the
    scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates
    and our ability to operate our business without infringing the intellectual property rights of others;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | ● | the
    uncertainty surrounding an investigation by the Israel Securities Authority into our historical public disclosures and the
    potential impact of such investigation on the trading and price of the Registrant’s securities or on our clinical, commercial
    and other business relationships, or on receiving the regulatory approvals necessary in order to commercialize our products;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    impact of competitive companies, technologies and our industry; and
| | - | ---------------------------------------------------------------------------



| | ● | the
    impact of the political and security situation in Israel, the U.S. and other countries we may obtain approvals for our products
    on our business.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



You
should review carefully the risks and uncertainties described under the heading “Item 3. Key Information – D. Risk
Factors” in this Annual Report on Form 20-F for a discussion of these and other risks that relate to our business and investing
in Kitov Parent’s ADSs and public warrants. The forward-looking statements contained in this Annual Report on Form 20-F
are expressly qualified in their entirety by this cautionary statement.



4






PART
I



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



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



Not
applicable



|B. | Advisors
|-- | --------



Not
applicable



|C. | Auditors
|-- | --------



Not
applicable



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



Not
applicable.



|ITEM
    3. | KEY
    INFORMATION
|----------- | -------------------



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



SELECTED
CONSOLIDATED FINANCIAL AND OTHER DATA



The
following table sets forth Kitov’s selected consolidated financial data for the periods ended and as of the dates indicated.
The following selected historical consolidated financial data for Kitov 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 for the three years ended December 31, 2016, 2015 and 2014, and Kitov’s selected
consolidated statements of financial position as of December 31, 2016 and 2015 have been derived from our audited consolidated
financial statements included elsewhere in this Annual Report on Form 20-F. The selected consolidated statements of operations
data for the year ended December 31, 2013, and the selected consolidated balance sheet data as of December 31, 2014 and 2013,
have been derived from Kitov’s audited consolidated financial statements not included in this Annual Report on Form 20-F.
We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. Our historical results are not
necessarily indicative of results to be expected in any future periods. You should read this information together with the section
of this Annual Report on Form 20-F entitled “Item 5. Operating and Financial Review and Prospects” and Kitov’s
audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 20-F.



|                                                                                                              |  | Year
Ended December 31,                                                        |        
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------ | -------
|                                                                                                              |  | 2016                                                                           |        
|                                                                                                              |  | (U.S. Dollars in thousands, except per share and weighted average shares data) |        
|Statement of Operations:                                                                                      |  |                                                                                |        
|Research and development expenses                                                                             |  |                                                                                | 4,180  
|General and administrative expenses                                                                           |  |                                                                                | 3,003  
|Stock exchange listing expense                                                                                |  |                                                                                | -      
|Other expenses                                                                                                |  |                                                                                | -      
|                                                                                                              |  |                                                                                |        
|Operating loss                                                                                                |  |                                                                                | 7,183  
|Financing expense, net                                                                                        |  |                                                                                | 4,942  
|Loss for the period                                                                                           |  |                                                                                | 12,125 
|Loss per ordinary share:(1)                                                                                   |  |                                                                                |        
|Basic and diluted                                                                                             |  |                                                                                | (0.11  
|                                                                                                              |  |                                                                                |        
|Weighted average number of ordinary shares used in computing basic and diluted loss per share (in thousands): |  |                                                                                | 115,115



|(1) | Basic
    loss per ordinary share is calculated by dividing the loss attributable to shareholders by the weighted average number of
    ordinary shares outstanding during the period. There are no differences between basic and diluted loss per ordinary share
    since there are no dilutive potential ordinary shares.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





5






*
Unless otherwise indicated, all information contained in this Annual Report on Form 20-F gives retrospective effect to a consolidation
of Kitov Parent’s share capital at a ratio of 1:13, which was effected on November 30, 2014, or the Consolidation, so that:
(A) each 13 ordinary shares of Kitov Parent were consolidated into one ordinary share of Kitov Parent; and (B) each of Kitov Parent’s
options (tradable and non-tradable) outstanding immediately prior to the consolidation of the share capital was adjusted by multiplying
the number of ordinary shares into which such option was exercisable by 1/13 (rounded to 0.07692).



|                          |  | As of December 31,           |        
|------------------------- |  | ---------------------------- | -------
|                          |  | 2016                         |        
|                          |  | (U.S. Dollars, in thousands) |        
|Balance Sheet Data:       |  |                              |        
|Cash and cash equivalents |  |                              | 6,758  
|Working capital (*)       |  |                              | 13,625 
|Total assets              |  |                              | 14,914 
|Total liabilities         |  |                              | (1,529 
|Accumulated deficit       |  |                              | (26,200
|Total equity (deficit)    |  |                              | 13,385 



(*)
Working capital is defined as current assets less current liabilities



On
July 11, 2013, Kitov Parent, (then known as Mainrom Line Logistics Ltd., a public shell company listed on the TASE with no assets,
debt and/or liabilities) acquired the issued and outstanding shares of Kitov Pharmaceuticals. As part of the acquisition, Mainrom
Line Logistics Ltd. changed its name to Kitov Pharmaceuticals Holdings Ltd. The acquisition was accounted for under IFRS as issued
by the IASB, as a reverse merger, and therefore the consolidated financial statements of Kitov Parent presented in this Annual
Report on Form 20-F include the financial results of Kitov Pharmaceuticals for the four years ended December 31, 2016, 2015, 2014,
and 2013 and of Kitov Parent for the period from July 11, 2013 to December 31, 2016. See Item 7. Major Shareholder and Related
Party Transactions – B. Related Party Transactions – Share Transfer Agreement with Kitov Pharmaceuticals” for
more information.



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



Not
applicable.



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



Not
applicable.



6








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



You
should carefully consider the risks we describe below, in addition to the other information set forth elsewhere in this Annual
Report on Form 20-F, including Kitov’s consolidated financial statements and the related notes beginning on page F-1, which
could materially affect our business, financial condition and future results. If any of the following risks actually occur, our
business, financial condition and results of operations could be materially and adversely affected. In that event, the trading
price of Kitov Parent’s ordinary shares, American Depositary Shares and public warrants could decline.



Risks
Related to Our Financial Condition and Capital Requirements



We
are a development stage biopharmaceutical company with a history of operating losses. We expect to incur significant additional
losses in the future and may never be profitable.



We
are a development stage biopharmaceutical company, and we are focused on the development of innovative pharmaceutical products.
Our current therapeutic candidates are in the preclinical and clinical development stages, and have not been approved for marketing
and are not being sold, marketed or commercialized. Our therapeutic candidates may require additional preclinical and/or clinical
trials or other testing before we can obtain regulatory approval, if we are able to obtain regulatory approval at all. We must
have regulatory approval for each product that we develop before we can sell such product. We have incurred losses from commencement
of our pharmaceutical research and development activities through December 31, 2016 of approximately $26.2 million as a result
of research and development activities, clinical trial related activities, investment/acquisition activities, listing for trading
and fund raising related activities, general administrative and other expenses. We may incur significant additional losses as
we continue to focus our resources on advancing our therapeutic candidates, including those we may acquire. Our ability to generate
revenue and achieve profitability depends mainly upon our ability, alone or with others, to successfully develop our therapeutic
candidates and obtain the required regulatory approvals in various territories and then commercialize our therapeutic candidates.
We may be unable to achieve any or all of these goals with regard to our therapeutic candidates. As a result, we may never be
profitable or achieve significant or sustained revenues.



Our
limited operating history as a pharmaceutical research and development company makes it difficult to evaluate our business and
prospects.



We
have a limited operating history as a pharmaceutical research and development company, and our operations to date have been limited
primarily to acquiring therapeutic candidates, research and development, raising capital and recruiting scientific and management
personnel and third party partners. We have not yet demonstrated an ability to commercialize or obtain regulatory approval for
any of our therapeutic candidates. Consequently, any predictions about our future performance may not be accurate, and you may
not be able to fully assess our ability to complete development or commercialize our therapeutic candidates, obtain regulatory
approvals, or achieve market acceptance or favorable pricing for our therapeutic candidates.



We
will need to raise additional capital to achieve our strategic objectives of developing and commercializing additional therapeutic
candidates, and our failure to raise sufficient capital would significantly impair our ability to fund our future operations,
develop our therapeutic candidates, seek regulatory approval that is a prerequisite to selling any product, attract development
or commercial partners and retain key personnel.



Our
business presently generates no revenues, and we plan to continue expending substantial funds in research and development, including
CMC, preclinical and clinical trials. We plan to fund our future operations through commercialization and out-licensing of our
therapeutic candidates and either debt or equity financing. However, we cannot be certain that we will be able to raise capital
on commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. We may
have difficulty raising needed capital or securing a development or commercialization partner in the future as a result of, among
other factors, our lack of revenues from commercialization of the therapeutic candidates, as well as the inherent business risks
associated with our company and present and future market conditions. In addition, global and local economic and geopolitical
conditions may make it more difficult for us to raise needed capital or secure a development or commercialization partner in the
future and may impact our liquidity. If we are unable to obtain future financing, we may be forced to delay, reduce the scope
of, or eliminate one or more of our research, development or commercialization programs related to our therapeutic candidates,
any of which may have a material adverse effect on our business, financial condition and results of operations. Moreover, to the
extent we are able to raise capital through the issuance of debt or equity securities, it could result in substantial dilution
to existing shareholders.





7






Our
long term capital requirements are uncertain and subject to numerous risks.



We
estimate that so long as no significant revenues are generated from our therapeutic candidates, we will need to raise substantial
additional funds to acquire, develop and/or commercialize our current therapeutic candidates and any additional therapeutic candidates,
as our current cash and short-term investments are not sufficient to complete the research and development of our current therapeutic
candidates and any additional therapeutic candidates, and to fund our related expenses. Our long term capital requirements are
expected to depend on many potential factors, including, among others:



| | ● | the
                                         regulatory path of each of our therapeutic candidates;                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                    
| | ● | our
    ability to successfully complete the required CMC development for our therapeutic candidates;                                                                                              
| |   |                                                                                                                                                                                                    
| | ● | our
    ability to successfully commercialize our therapeutic candidates, including securing commercialization agreements with third
    parties and favorable pricing and market share;           
| |   |                                                                                                                                                                                                    
| | ● | the
    progress, success and cost of our preclinical and/or clinical trials and research and development programs;                                                                                
| |   |                                                                                                                                                                                                    
| | ● | the
    costs, timing and outcome of regulatory review and obtaining regulatory approval of our therapeutic candidates and addressing
    regulatory and other issues that may arise post-approval;
| |   |                                                                                                                                                                                                    
| | ● | the
    costs of obtaining and enforcing our issued patents and defending intellectual property-related claims;                                                                                    
| |   |                                                                                                                                                                                                    
| | ● | the
    costs of developing sales, marketing and distribution channels; and                                                                                                                        
| |   |                                                                                                                                                                                                    
| | ● | our
    consumption of available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner
    than anticipated.                                      



If
we are unable to obtain approval, commercialize or out-license our therapeutic candidates or obtain future financing, we may be
forced to delay, reduce the scope of, or eliminate one or more of our research and development programs related to the therapeutic
candidates, which may have a material adverse effect on our business, financial condition and results of operations.



Risks
Related to Our Business and Regulatory Matters



If
we and/or our potential commercialization partners are unable to obtain FDA and/or other foreign regulatory authority approval
for our therapeutic candidates, we and/or our potential commercialization partners will be unable to commercialize our therapeutic
candidates.



To
date, we have not marketed, distributed or sold any therapeutic candidate or other product. We have entered into only one out-licensing
agreement for manufacturing and distribution of our KIT-302 therapeutic candidate in South Korea, which is dependent upon achieving
regulatory clearance for the therapeutic candidate in South Korea. Our therapeutic candidates are subject to extensive governmental
laws, regulations and guidelines relating to development, preclinical and clinical trials, manufacturing and commercialization
of drugs. We may not be able to obtain regulatory approval for any of our therapeutic candidates in a timely manner or at all.



Any
material delay in obtaining, or the failure to obtain, required regulatory approvals will increase our costs and materially and
adversely affect our ability to generate future revenues. Any regulatory approval to market a therapeutic candidate may be subject
to limitations on the indicated uses for marketing the therapeutic candidate or may impose restrictive conditions of use, including
cautionary information, thereby limiting the size of the market for the therapeutic candidate. We also are, and will be, subject
to numerous regulatory requirements from both the FDA and foreign state agencies that govern the conduct of preclinical and clinical
trials, manufacturing and marketing authorization, pricing and third-party reimbursement. Moreover, approval by one regulatory
authority does not ensure approval by other regulatory authorities in separate jurisdictions. Each jurisdiction may have different
approval processes and may impose additional testing requirements for our therapeutic candidates than other jurisdictions. For
example, even if the FDA grants its approval to market KIT-302 for certain indications of use, the South Korean regulatory authorities
may impose additional requirements or place other limitations on the indications for use in South Korea, before our licensee and
distributor in South Korea may commence manufacturing and selling KIT-302. Additionally, the FDA or other foreign regulatory bodies
may change their approval policies or adopt new laws, regulations or guidelines in a manner that delays or impairs our ability
to obtain the necessary regulatory approvals to commercialize our therapeutic candidates.





8






Pre-clinical,
CMC, and clinical trials may involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies
and trials may not be predictive of future trial results. We and/or our potential commercialization partners will not be able
to commercialize our therapeutic candidates without completing such trials.



We
have limited experience in conducting and managing the CMC, preclinical and clinical trials that are required to commence commercial
sales of our therapeutic candidates. CMC, preclinical and clinical trials are expensive, complex, can take many years to complete
and have uncertain outcomes. We cannot predict whether we, independently or through third parties, will encounter problems with
any of the completed, ongoing or planned CMC, preclinical and/or clinical trials that will cause delays, including suspension
of preclinical and/or clinical trials, delays in recruiting patients into the preclinical and/or clinical trials, or delay of
data analysis or release of the final report. The CMC, preclinical and clinical trials of our therapeutic candidates may take
significantly longer to complete than is estimated. Failure can occur at any stage of the testing, and we may experience numerous
unforeseen events during, or as a result of, the CMC, preclinical and/or clinical trial process that could delay or prevent commercialization
of our current or future therapeutic candidates.



In
connection with the CMC, preclinical and clinical trials for our therapeutic candidates and other therapeutic candidates that
we may seek to develop in the future, either on our own or through licensing or partnering agreements, we face various risks,
including but not limited to:



| | ● | delays
    in manufacturing the drug substance and drug product for preclinical and clinical trials;                                                                                                                                           
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                
| | ● | delays
    in manufacturing the drug substance and drug product following NDA approval, if we receive such approval all;                                                                                                                       
| |   |                                                                                                                                                                                                                                                
| | ● | delays
    in securing clinical investigators or trial sites for clinical trials that must be completed for us to obtain any approval
    that we seek;                                                                                        
| |   |                                                                                                                                                                                                                                                
| | ● | delays
    in receiving import or other government approvals to ensure appropriate drug supply;                                                                                                                                                
| |   |                                                                                                                                                                                                                                                
| | ● | delays
    in obtaining institutional review board (human ethics committee) and other regulatory approvals to commence a clinical trial;                                                                                                       
| |   |                                                                                                                                                                                                                                                
| | ● | negative
    or inconclusive results from clinical trials;                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                
| | ● | the
    FDA or other foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical
    studies and may not approve initiation of certain clinical trials;                               
| |   |                                                                                                                                                                                                                                                
| | ● | an
    inability to monitor patients adequately during or after treatment;                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                
| | ● | problems
    with investigator or patient compliance with the trial protocols;                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                
| | ● | a
    therapeutic candidate may not prove safe or efficacious;                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                
| | ● | there
    may be unexpected or even serious adverse events and side effects from the use of a therapeutic candidate;                                                                                                                           
| |   |                                                                                                                                                                                                                                                
| | ● | the
    results with respect to any therapeutic candidate may not confirm the positive results from earlier preclinical studies or
    clinical trials;                                                                                        
| |   |                                                                                                                                                                                                                                                
| | ● | the
    results may not meet the level of statistical significance required by the FDA or other foreign regulatory authorities;                                                                                                                
| |   |                                                                                                                                                                                                                                                
| | ● | the
    results will Left only limited and/or restrictive uses, including the inclusion of warnings and contraindications, which
    could significantly limit the marketability and profitability of the therapeutic candidate;               
| |   |                                                                                                                                                                                                                                                
| | ● | the
    clinical trials may be delayed or not completed due to the failure to recruit suitable candidates or if there is a lower rate
    of suitable candidates than anticipated or if there is a delay in recruiting suitable candidates; and
| |   |                                                                                                                                                                                                                                                
| | ● | changes
    to the current regulatory requirements related to clinical trials which can delay, hinder or lead to unexpected costs in connection
    with our receiving the applicable regulatory approvals.                                    





9






A
number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience
than us, have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier preclinical
and/or clinical trials. As such, we do not know whether any clinical trials we may conduct will demonstrate adequate efficacy
and safety sufficient to obtain regulatory approval to market our therapeutic candidates. If any of the preclinical and/or clinical
trials of any therapeutic candidate do not produce favorable results, our ability to obtain regulatory approval for the therapeutic
candidate may be adversely impacted, which will have a material adverse effect on our business, financial condition and results
of operations.



If
we do not establish collaborations for our therapeutic candidates or otherwise raise substantial additional capital, we will likely
need to alter our development and any commercialization plans.



Our
drug development programs and the potential commercialization of our therapeutic candidates will require additional cash to fund
expenses. As such, our strategy includes selectively partnering or collaborating with multiple pharmaceutical and biotechnology
companies to assist us in furthering development and potential commercialization of our therapeutic candidates, in some or all
jurisdictions. While we have entered into an out-licensing agreement for manufacturing and distribution of our KIT-302 therapeutic
candidate in South Korea, we may not be successful in collaborations with other third parties on acceptable terms, or at all.
In addition, if we fail to negotiate and maintain suitable development or commercialization agreements, we may have to limit the
size or scope of our activities or we may have to delay one or more of our development or commercialization programs. Any failure
to enter into or maintain development or commercialization agreements with respect to the development, marketing and commercialization
of any therapeutic candidate or failure to develop, market and commercialize such therapeutic candidate independently will have
an adverse effect on our business, financial condition and results of operation.



Any
collaborative arrangements that we establish may not be successful or we may otherwise not realize the anticipated benefits from
these collaborations. We do not control third parties with whom we have or may have collaborative arrangements, and we rely on
them to achieve results which may be significant to us. In addition, any future collaboration arrangements may place the development
and commercialization of our therapeutic candidates outside our control, may require us to relinquish important rights or may
otherwise be on terms unfavorable to us.



Our
collaborative arrangements require us to rely on external consultants, advisors, and experts for assistance in several key functions,
including preclinical and clinical development, manufacturing, regulatory, market research, and intellectual property. We do not
control these third parties, but we rely on them to achieve results, which may be significant to us. Additionally, we are responsible
for any quality or regulatory issue that a collaborator may have that affects one or more of our therapeutic candidates. Relying
upon collaborative arrangements to develop and commercialize our therapeutic candidates subjects us to a number of risks, including:



| | ● | we
    may not be able to control the amount and timing of resources that our collaborators may devote to our therapeutic candidates;                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                             
| | ● | should
    a collaborator fail to comply with applicable laws, rules, or regulations when performing services for us, we could be held
    liable for such violations;                                      
| |   |                                                                                                                                                                                                             
| | ● | our
    collaborators may experience financial difficulties or changes in business focus;                                                                                                                   
| |   |                                                                                                                                                                                                             
| | ● | our
    collaborators may experience quality or regulatory issues that negatively affect our therapeutic candidates;                                                                                        
| |   |                                                                                                                                                                                                             
| | ● | our
    collaborators may fail to secure adequate commercial supplies of our therapeutic candidates upon marketing approval, if at
    all;                                                                 
| |   |                                                                                                                                                                                                             
| | ● | our
    collaborators may have a shortage of qualified personnel;                                                                                                                                           
| |   |                                                                                                                                                                                                             
| | ● | we
    may be required to relinquish important rights, such as local trademark, marketing and distribution rights;                                                                                          
| |   |                                                                                                                                                                                                             
| | ● | business
    combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s
    willingness or ability to complete its obligations under any arrangement;  
| |   |                                                                                                                                                                                                             
| | ● | under
    certain circumstances, a collaborator could move forward with a competing therapeutic candidate developed either independently
    or in collaboration with others, including our competitors; and
| |   |                                                                                                                                                                                                             
| | ● | collaborative
    arrangements are often terminated or allowed to expire, which could delay the development and may increase the cost of developing
    our therapeutic candidates.                         



If
any of these scenarios materialize, they could have an adverse effect on our business, financial condition or results of operations.



10






Our
current business model is based largely upon the combination of drugs that have not been previously combined, as well as on new
chemical entities (NCEs) that have not yet been administered to humans. Unexpected difficulties or delays in successfully developing
or marketing such combination, and new drugs could have an adverse effect on our business, financial condition and results of
operations.



We
are currently focused on the combination of drugs that have not been previously combined as well as on new chemical entities
that have not yet been administered to humans. Since KIT-302 has APIs that have not previously been combined into one
FDA-approved drug product or used at all in a clinical setting outside the scope of a clinical trial, and our new chemical
entity NT219 has never been used in a clinical setting, we cannot be certain whether KIT-302 and/or NT 219 will be safe and
efficacious. In addition, we cannot be certain that the market will consider our KIT-302 combination therapeutic candidate,
our new chemical entity NT219, or any other therapeutic candidate that we may develop in the future to be superior to the
current gold standard of care or to treatment with the separate drug components. Any delays in perfecting the combination,
the production of the combination, or in market acceptance of the combination or new chemical entities could have an adverse
effect on our business, financial condition and results of operations.



In
addition, as part of our strategy for growth, we may consider the acquisition of therapeutic candidates at various stages of development
and in a variety of therapeutic areas. For example, on January 13, 2017, we announced that we had acquired a controlling interest
in TyrNovo Ltd., a privately held Israeli developer of novel small molecules in the oncology therapeutic field. TyrNovo’s NT219
therapeutic candidate is intended to work by overcoming tumors’ cancer drug resistance and is expected to be developed to
be used in combination with cancer drugs that are already approved and marketed. For more information see Item 4.B –
Business Overview – NT219. We may also consider the acquisition or marketing rights of approved drug products as well. However,
we may not be able to identify additional suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.
In this regard, acquisitions involve numerous risks, including difficulties in the integration of the acquired therapeutic candidates
and the diversion of management’s attention from other business concerns. Although we will endeavor to evaluate the risks
inherent in any particular transaction, there can be no assurance that we will properly ascertain all such risks. In addition,
acquisitions could result in the incurrence of substantial additional indebtedness and other expenses or in potentially dilutive
issuances of equity securities. There can be no assurance that difficulties encountered with acquisitions will not have a material
adverse effect on our business, financial condition and results of operations.



We
rely on third parties to conduct our CMC, preclinical and clinical trials, and those third parties may not perform satisfactorily,
including, but not limited to, failing to meet established deadlines for the completion of such clinical trials.



We
do not have the ability independently to conduct CMC, preclinical or clinical trials for our product candidates, and we rely on
third parties, such as contract manufacturing organizations, contract research organizations, medical institutions, contract laboratories,
current and potential development or commercialization partners, clinical investigators and independent study monitors, to perform
these functions. Our reliance on these third parties for development activities reduces our control over these activities. For
example on March 28, 2017, we announced that due to a delay in the provision of technical documentation from an external service
provider, the Company’s New Drug Application for KIT-302 for the FDA is now expected to be submitted to the FDA only during
the course of Q2 2017, later than initially anticipated by the Company.



Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. Although we have, in
the ordinary course of business, entered into agreements with these third parties, we continue to be responsible for confirming
that each of our preclinical and clinical trials is conducted in accordance with its general investigational plan and protocol.
Moreover, the FDA requires us to comply with regulations and standards, commonly referred to as good laboratory, manufacturing,
and clinical practices (GCP), for conducting, recording and reporting the results of preclinical and clinical trials to assure
that data and reported results are credible and accurate and that the clinical trial participants are adequately protected. Regulatory
authorities in other jurisdictions may have similar responsibilities and requirements. Our reliance on third parties does not
relieve us of these responsibilities and requirements.





11






To
date, we believe our contract manufacturing organizations, contract research organizations and other similar entities with which
we are working have generally performed well. However, if these third parties do not successfully carry out their contractual
duties or meet expected deadlines, we may be required to replace them. Although we believe that there are a number of other third-party
contractors we could engage to continue these activities, it may result in a delay of the affected trial and additional costs.
Accordingly, we may be delayed in obtaining regulatory approvals for our therapeutic candidates and may be delayed in our efforts
to successfully commercialize our therapeutic candidates for targeted diseases.



In
addition, we rely substantially on third-party data managers for the CMC, preclinical and clinical trial data that we present
to regulatory authorities in order to obtain marketing authorizations. Although we attempt to audit and control the quality of
third party data, we cannot guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not
been fraudulently generated. There is no assurance that these third parties will pass FDA or regulatory audits, which could delay
or prohibit regulatory approval.



If
third parties do not manufacture our therapeutic candidates in sufficient quantities, in the required timeframe, and at an acceptable
cost, clinical development and commercialization of our therapeutic candidates would be delayed.



We
do not currently own or operate manufacturing facilities, and we rely, and expect to continue to rely, on third parties to manufacture
preclinical, clinical and commercial quantities of our therapeutic candidates. Our reliance on third parties includes our reliance
on them for quality assurance related to regulatory compliance. Our current and anticipated future reliance upon others for the
manufacture of our therapeutic candidates may adversely affect our future profit margins, if any, and our ability to develop therapeutic
candidates and commercialize any therapeutic candidates on a timely and competitive basis.



We
may not be able to maintain our existing or future third party manufacturing arrangements on acceptable terms, if at all. If for
some reason our existing or future manufacturers do not perform as agreed or expected, or our existing or future manufacturers
otherwise terminate their arrangements with us, we may be required to replace them. Although we are not substantially dependent
upon our existing manufacturing agreements since we could replace them with other third party manufacturers, we may incur added
costs and delays in identifying, engaging, qualifying and training any such replacements.



We
rely on third party contract vendors to manufacture and supply us with active pharmaceutical ingredients, or “APIs”,
compliant with the International Conference of Harmonization Q7 guidance and applicable law, in the quantities we require on a
timely basis.



We
currently do not manufacture any API ourselves. Instead, we rely on third-party vendors for the manufacture and supply of our
APIs that are used to formulate our therapeutic candidates. While there are many potential API suppliers in the market, if these
suppliers are incapable or unwilling to meet our current or future needs on acceptable terms or at all, we could experience delays
in conducting additional clinical trials of our therapeutic candidates and incur additional costs.



While
there may be several alternative suppliers of API in the market, we have not conducted extensive audits and investigations into
the quality or availability of their APIs. In addition we may acquire therapeutic candidates which already have long term commitments
to a specific API supplier. As a result, we can provide no assurances that supply sources will not be interrupted from time to
time. Changing API suppliers or finding and qualifying new API suppliers can be costly and take a significant amount of time.
Many APIs require significant lead time to manufacture. There can also be challenges in maintaining similar quality or technical
standards from one manufacturing batch to the next.



If
we are not able to find stable, reliable supplies of our APIs, we may not be able to produce enough supplies of our therapeutic
candidates, which could affect our business, financial condition and results of operation.





12






We
anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and
other regulatory agencies for any of our therapeutic candidates.



To
date, our therapeutic candidates have been manufactured in relatively small quantities by third-party manufacturers.



To date, our third-party
manufacturers have manufactured sufficient quantities of KIT-302 for formulation development, PK studies, clinical trials, and
the required large scale production in support of our NDA package that we intend to submit to the FDA for the purposes of approving
KIT-302 for marketing and commercial sale in the United States. We are also in discussions with third-party manufacturers for
the manufacture of cGMP-grade NT219. If the FDA or other regulatory agencies approve for marketing and commercial sale, KIT-302
and/or any other therapeutic candidate that we may develop in the future, we expect that we would continue to rely, at least initially,
on third-party manufacturers to produce commercial quantities of our approved therapeutic candidates. These manufacturers may
not be able to successfully increase the manufacturing capacity for any of our therapeutic candidates that may be approved in
the future in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation
studies, which the FDA must review and approve. If they are unable to successfully increase the manufacturing capacity for KIT-302
or any therapeutic candidate that we may develop in the future, or we are unable to establish alternative manufacturing capabilities,
the commercial launch of any therapeutic candidates that are approved in the future may be delayed or there may be a shortage
in supply.





We
and our third-party manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities.



We
and our contract manufacturers are, and will be, required to adhere to laws, regulations and guidelines of the FDA and other foreign
regulatory authorities setting forth cGMPs. These laws, regulations and guidelines cover all aspects of the manufacturing, testing,
quality control and recordkeeping relating to our therapeutic candidates or drugs that may be approved in the future. We and our
manufacturers may not be able to comply with applicable laws, regulations and guidelines. We and our manufacturers are and will
be subject to unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the U.S.
Our failure, or the failure of our third-party manufacturers, to comply with applicable laws, regulations and guidelines could
result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities
to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of our therapeutic candidates, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect regulatory approval and supplies of our therapeutic candidates and materially and adversely affect our business,
financial condition and results of operations.



Even
if we obtain regulatory approvals, our therapeutic candidates will be subject to ongoing regulatory review. If we fail to comply
with continuing U.S. and applicable foreign laws, regulations and guidelines, we could lose those approvals, and our business
would be seriously harmed.



Even
if our therapeutic candidates receive regulatory approval, we or our potential commercialization partners, as applicable, will
be subject to ongoing reporting obligations, including pharmacovigilance, and the therapeutic candidates and the manufacturing
operations will be subject to continuing regulatory review, including inspections by the FDA and other foreign regulatory authorities.
The results of this ongoing review may result in the withdrawal of a therapeutic candidate from the market, the interruption of
the manufacturing operations or the imposition of labeling or marketing limitations. Since many more patients are exposed to drugs
following their marketing approval, unanticipated adverse reactions or serious adverse reactions that were not observed in preclinical
and/or clinical trials may be observed during the commercial marketing of a therapeutic candidate that may be approved in the
future.





13






As
we develop our therapeutic candidates or commercialize our products that may be approved in the future, we may also periodically
discuss with the FDA and other regulatory authorities certain clinical, regulatory and manufacturing matters and, our views may,
at times, differ from those of the FDA and other regulatory authorities. For example, the FDA may seek to regulate our combination
therapeutic candidates, like KIT-302, or any product we may sell or market that consist of two or more active ingredients as combination
drugs under its Combination Drug Policy. The Combination Drug Policy requires that we demonstrate that each active ingredient
in a drug product contributes to the product’s claimed effect. If the FDA raises questions regarding whether available data
and information provided to the FDA demonstrate the contribution of each active ingredient in such combination drug products,
we may be required to provide additional data, which may require us to conduct additional preclinical studies or clinical trials.
If we are required to conduct additional clinical trials or other testing of our therapeutic candidates or drug products that
may be approved in the future, we may face substantial additional expenses, be delayed in obtaining marketing approval or may
never obtain marketing approval for such therapeutic candidate or drug products we may sell or market.



In
addition, the manufacturer and the manufacturing facilities that we or our potential commercialization partners use or will use
to manufacture any therapeutic candidate will be subject to periodic and unannounced review and inspection by the FDA and other
foreign regulatory authorities. Later discovery of previously unknown problems with any therapeutic candidate, manufacturer or
manufacturing process, or failure to comply with rules and regulatory requirements, may result in actions such as:



| | ● | restrictions
    on such therapeutic candidate, manufacturer or manufacturing process;                                                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                    
| | ● | warning
    letters from the FDA or other foreign regulatory authorities;                                                                          
| |   |                                                                                                                                                    
| | ● | withdrawal
    of the therapeutic candidate from the market;                                                                                       
| |   |                                                                                                                                                    
| | ● | suspension
    or withdrawal of regulatory approvals;                                                                                              
| |   |                                                                                                                                                    
| | ● | refusal
    to approve pending applications or supplements to approved applications that we or our potential commercialization partners
    submit;
| |   |                                                                                                                                                    
| | ● | voluntary
    or mandatory recall;                                                                                                                 
| |   |                                                                                                                                                    
| | ● | fines;                                                                                                                                             
| |   |                                                                                                                                                    
| | ● | refusal
    to permit the import or export of our therapeutic candidates;                                                                          
| |   |                                                                                                                                                    
| | ● | product
    seizure or detentions;                                                                                                                 
| |   |                                                                                                                                                    
| | ● | injunctions
    or the imposition of civil or criminal penalties; or                                                                               
| |   |                                                                                                                                                    
| | ● | adverse
    publicity or changes to the drug’s labeling.                                                                                           



If
we, or our current or potential commercialization partners, suppliers, third party contractors or clinical investigators are slow
to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements
or policies, we or our potential commercialization partners may lose marketing approval for any of our therapeutic candidates
if any of our therapeutic candidates are approved, resulting in decreased or lost revenue from milestones, product sales or royalties.



Modifications
to our therapeutic candidates, or to any other therapeutic candidates that we may acquire or develop in the future, are likely
require new regulatory clearances or approvals before promotion or sale or may require us or our current or potential development
and commercialization partners, as applicable, to recall or cease marketing these therapeutic candidates until clearances are
obtained.



Modifications
to our therapeutic candidates, after they have been approved for marketing, if at all, or to any other therapeutic candidate that
we may develop in the future, may require new regulatory clearance or approvals, and, if necessitated by a problem with a marketed
product, may result in the recall or suspension of marketing of the previously approved and marketed product until clearances
or approvals of the modified product are obtained. The FDA and other foreign regulatory authorities require manufacturers of approved
drugs to make and document a determination of whether or not a modification requires a new approval, supplemental application
or clearance. A manufacturer may determine in conformity with applicable laws, regulations and guidelines that a modification
may be implemented without pre-clearance by the FDA or other foreign regulatory authorities; however, the FDA or other foreign
regulatory authorities may disagree with the manufacturer’s decision. The FDA or other foreign regulatory authorities may
also on their own initiative determine that a new clearance or approval is required. If the FDA or other foreign regulatory authorities
require new clearances or approvals of any drug product for which we or our current or potential development and commercialization
partners previously received marketing approval, we or our current or potential development and commercialization partners may
be required to recall such drug product and to stop marketing the drug product as modified, which could require us or our current
or potential development and commercialization partners to redesign the therapeutic candidate and cause a material adverse effect
on our business, financial condition and results of operations.





14






While
we have negotiated a special protocol assessment, or SPA, agreement with the FDA relating to the Phase III clinical trial protocol
for KIT-302, and have received minutes of a pre-NDA submission meeting with the FDA, this agreement and these minutes do not guarantee
approval of KIT-302 or any other particular outcome from the final regulatory review of the study or the therapeutic candidate.



We
have reached an agreement with the FDA to conduct the Phase III clinical trial for KIT-302 pursuant to an SPA agreement. The FDA’s
SPA process is designed to facilitate the FDA’s review and approval of drugs by allowing the FDA to evaluate the proposed
design and size of Phase III trials that are intended to form the primary basis for determining a therapeutic candidate’s
efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s
questions regarding, among other things, primary efficacy endpoints, trial design and data analysis plans, within 45 days of receipt
of the request. The FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to support
regulatory approval of the therapeutic candidate with respect to its effectiveness and safety against the indication studied.
All agreements and disagreements between the FDA and the sponsor regarding an SPA agreement must be clearly documented in an SPA
letter or the minutes of a meeting between the sponsor and the FDA. Nevertheless, an SPA agreement does not guarantee approval
of a therapeutic candidate, and approval will require that the data will convince the FDA of the safety, efficacy and need for
the therapeutic candidate for each of its intended use(s). Even if the FDA agrees to the design, execution and analysis proposed
in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement in certain circumstances. In particular,
an SPA agreement is not binding on the FDA if public health concerns emerge that were unrecognized at the time of the SPA agreement,
other new scientific concerns regarding product safety or efficacy arise, the sponsor company fails to comply with the agreed
upon trial protocols, or the relevant data, assumptions or information provided by the sponsor in a request for the SPA change
or are found to be false or omit relevant facts. In addition, even after an SPA agreement is finalized, the SPA agreement may
be modified[1], and such modification will be deemed binding on the FDA review division, except under the circumstances
described above, if the FDA and the sponsor agree in writing to modify the protocol and such modification is intended to improve
the study. The FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and
results from any study that is the subject of the SPA agreement. A revocation or alteration in our existing SPA agreement could
significantly delay or prevent approval of our application.



Our
SPA agreement with the FDA does not ensure that KIT-302 will receive marketing approval or that the approval process will be faster
than conventional regulatory procedures. Further, we cannot make assurances that the reported results of our Phase III clinical
trial of KIT-302, and the minutes of a pre-NDA submission meeting with the FDA which we received in May 2016, will result in any
FDA approval for KIT-302. We also cannot make assurances that the uncertainty surrounding an investigation by the Israeli Securities
Authority into our historical public disclosures concerning certain aspects of our Phase III clinical trial of KIT-302, will not
have an impact on the FDA approval process for KIT-302 nor what impact such might be. See “Item 8 – Financial Information
– Legal Proceedings”. Further, our on-going renal clinical trial (See Item 4. Information on the Company – A.
History and Development of the Company – Recent Developments – Renal Clinical Trial), whose primary efficacy endpoint
is comparable to that of our Phase III Clinical Trial, may produce results that are inconsistent with those of our Phase III Clinical
Trial. While we believe that our Phase III clinical trial has been completed in accordance with the SPA agreement and that the
data generated met the endpoints that have been agreed in the SPA agreement to represent adequate evidence of effectiveness, and
while we anticipate that we will be able to satisfactorily provide the additional information requested by the FDA as part of
the minutes we received following the pre-NDA submission meeting, and we believe that the investigation by the Israeli Securities
Authority will not have any material impact on the FDA approval process, and while we have no reason to believe that our renal
clinical trial will produce results that are inconsistent with those of our Phase III Clinical Trial, if the FDA revokes or alters
its agreement under the SPA agreement, or if the FDA interprets the data collected from the clinical trial differently than we
do, or if the FDA is not satisfied with the additional information we submit to them, or if the results of our renal clinical
trial are inconsistent with those of our Phase III Clinical Trial, or if the Israeli Securities Authority investigation negatively
impacts the NDA review process or causes questions to be raised about the validity of the data collected from the clinical trial,
the FDA may not deem the data sufficient to support an application for regulatory approval, which could materially adversely affect
our business, financial condition and results of operations.





15






We
depend on our ability to identify and acquire or in-license therapeutic candidates to achieve commercial success.



Our
therapeutic candidates, and our subsidiaries which own the rights to therapeutic candidates, were all acquired by us from third
parties. We evaluate internally and with external consultants each potential therapeutic candidate. However, there can be no assurance
as to our ability to accurately or consistently select therapeutic candidates that have the highest likelihood to achieve commercial
success.



If
we cannot meet our obligations under our in-license agreement with Yissum, or if other events occur that are not within our control,
we could lose our rights to our NT219 therapeutic candidate, experience delays in developing or commercializing our NT219 therapeutic
candidate or incur additional costs, which could have a material adverse effect on our business, financial condition and results
of operations.



We
acquired rights to our NT219 therapeutic candidate from Yissum Research and Development Company of the Hebrew University of Jerusalem
Ltd. (“Yissum”), the Hebrew University Technology Transfer Company pursuant to a license agreement. If we do not meet
our obligations under this license agreement, or if other events occur that are not within our control we could lose the rights
to our NT219 therapeutic candidate, experience delays in developing or commercializing our NT219 therapeutic candidate or incur
additional costs, any of which could have a material adverse effect on our business, financial condition and results of operations.



In
addition, Yissum is responsible under the license agreement for the filing and prosecuting certain patent applications and maintaining
certain issued patents licensed to us. If Yissum does not meet its obligations in a timely manner or if other events occur that
are not within Yissum’s control, which impact Yissum’s ability to prosecute certain patent applications and maintain
certain issued patents licensed to us, our success of developing and commercializing theNT219 therapeutic candidate, could be
jeopardized, which could have a material adverse effect on our business, financial condition and results of operations. Additionally,
Yissum may decide to discontinue maintaining certain patents in certain territories for various reasons, such as a current belief
that the commercial market for the therapeutic candidate will not be large or that there is a near-term patent expiration that
may reduce the value of the therapeutic candidate. In the event Yissum discontinues maintaining such patents, we may not be able
to enforce rights for our therapeutic candidates or protect our therapeutic candidates from competition in those territories.



Our
business could suffer if we are unable to attract and retain key employees or directors.



The
loss of the services of members of senior management or other key personnel could delay or otherwise adversely impact the successful
completion of our planned CMC, preclinical and/or clinical trials or the commercialization of our therapeutic candidates or otherwise
affect our ability to manage our company effectively and to carry out our business plan. We do not maintain key-man life insurance
for any of our personnel. Although we have entered into employment or consultancy agreements with all of the members of our senior
management team, members of our senior management team may resign at any time. High demand exists for senior management and other
key personnel in the pharmaceutical industry. There can be no assurance that we will be able to continue to retain and attract
such personnel.



Our
growth and success also depend on our ability to attract and retain additional highly qualified scientific, technical, business
development, marketing, managerial and finance personnel. We experience intense competition for qualified personnel, and the existence
of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals
or subject us to liability from their former employers. In addition, if we elect to independently commercialize any therapeutic
candidate, we will need to expand our marketing and sales capabilities. While we attempt to provide competitive compensation packages
to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we
have, making it difficult for us to compete successfully for key personnel. Compensation packages for certain of our senior office
holders are subject to approval of our compensation committee and board of directors and in certain instances of our shareholders
as well. We may not be able to achieve the required corporate approvals for proposed compensation packages, further making it
difficult for us to compete successfully with privately owned companies in order to attract and retain key personnel. If we cannot
attract and retain sufficiently qualified technical employees on acceptable terms, we may not be able to develop and commercialize
competitive therapeutic candidates. Further, any failure to effectively integrate new personnel could prevent our business from
successfully growing.





16






We
are an international business, and we are exposed to various global and local risks that could have an adverse effect on our business.



We
operate our business in multiple international jurisdictions. Such operations could be affected by changes in foreign exchange
rates, capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property
legal protections and remedies, trade regulations and procedures and actions affecting approval, production, pricing, and marketing
of, reimbursement for and access to, our products, as well as by political unrest, unstable governments and legal systems and
inter-governmental disputes. Any of these changes could adversely affect our business.



Kitov
Parent’s subsidiary, TyrNovo, has received and may continue to receive Israeli governmental grants to assist in the funding
of its research and development activities. If TyrNovo loses funding from these research and development grants, we may encounter
difficulties in the funding of future research and development projects and implementing technological improvements, which would
harm our operating results and may restrict the activities of our subsidiary, TyrNovo. We may encounter difficulties in securing
a commercialization partner for TyrNovo’s therapeutic candidates as the grants received from the Israeli government need
to be repaid from future royalties.



Through
December 31, 2016, Kitov Parent’s newly-acquired subsidiary, TyrNovo had obligations to  the National Authority for
Technological Innovation, or the Innovation Authority (formerly known as the Office of the Chief Scientist of the Ministry of
Economy and Industry, or the OCS) with respect to an aggregate of approximately NIS 5.5 million with respect to grants from
the OCS in connection with TyrNovo’s technology. The requirements and restrictions for such grants are found in the Encouragement
of Research, Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Law for
the Encouragement of Research and Development in Industry 5744-1984), or the Innovation Law, and the regulations and
guidelines thereunder. Under the Innovation Law and the regulations thereunder, royalties of 3% to 6% on the income generated
from sales of products and related services developed in whole or in part under OCS programs are payable to the OCS, up to
the total amount of grants received, linked to the U.S. dollar and bearing annual interest.





The technologies licensed
to TyrNovo by Yissum were developed, at least in part, with funds from these grants, and accordingly is obligated to pay these
royalties on sales of any of its OCS funded products that achieve regulatory approval. In addition, the Government of Israel may
from time to time audit sales of products which it claims incorporate technology funded via OCS programs and this may lead to additional
royalties being payable on additional products. As of December 31, 2016, the maximum royalty amount that in general would be payable
by TyrNovo, excluding interest, is approximately NIS 5.5 million, and as of such date TyrNovo has not paid any royalties to the
OCS. We may encounter difficulties in securing a commercialization partner for TyrNovo’s therapeutic candidates due to the
requirement to pay future royalties.



Following the full
payment of such royalties and interest, there is generally no further liability for royalty payments; however, other
restrictions under the Innovation Law, described in the risk factor below under “The OCS grants TyrNovo’s
technology has received for research and development expenditures restrict its ability to manufacture products and transfer
(including by a way of license for R&D purposes) know-how outside of Israel and require  it  to satisfy specified
conditions. In addition,
we may encounter difficulties partnering TyrNovo’s therapeutic candidates with entities outside Israel due to certain restrictions
regarding manufacturing and transferring of know-how (including by a way of license for R&D purposes) outside of Israel imposed
through the Israeli Government grants”, will continue to apply even after TyrNovo has repaid the full amount of royalties on the grants.



These grants have funded
some of the personnel, development activities with subcontractors, and other research and development costs and expenses incurred
in connection with the development of the technologies licensed to TyrNovo by Yissum. However, if these grants are not funded
in their entirety or if new grants are not awarded in the future, due to, for example, OCS budget constraints or governmental
policy decisions, TyrNovo’s ability to fund future research and development and implement technological improvements would
be impaired, which would negatively impact our ability to develop NT219.





17






The
OCS grants which TyrNovo’s technology has received for research and development expenditures restrict its ability to manufacture
products and transfer (including by a way of license for R&D purposes) know-how outside of Israel and require it to satisfy
specified conditions. In addition, we may encounter difficulties partnering TyrNovo’s therapeutic candidates with entities
outside Israel due to certain restrictions regarding manufacturing and transferring of know-how (including by a way of license
for R&D purposes) outside of Israel imposed through the Israeli Government grants.



The research and development
efforts underlying TyrNovo’s technology have been financed, in part, through the grants received from the OCS with respect
to TyrNovo’s technology. TyrNovo, therefore, must comply with the requirements of the Innovation Law.





Under
the Innovation Law, TyrNovo is generally prohibited from manufacturing products developed under OCS funding outside of the State
of Israel without the prior approval of the OCS and subject to payment of increased royalties, as further described in Item 4.B
– Business Overview – Government Regulations and Funding. TyrNovo may not receive the required approvals for any proposed
transfer of manufacturing activities. This restriction may impair TyrNovo’s ability to outsource manufacturing rights abroad.



Additionally,
under the Innovation Law, TyrNovo is prohibited from transferring, including by way of license for R&D purposes, the OCS-funded
know-how and related intellectual property rights outside of the State of Israel, except under limited circumstances and only
with the prior approval of the OCS. TyrNovo may not receive the required approvals for any proposed transfer, and even if received,
TyrNovo may be required to pay the OCS a redemption fee, which may result in significant amounts, in accordance with the formulae
stipulated under the Innovation Law and related regulations, while such fee will not exceed 600% of the grant amounts plus interest.



Approval
of the transfer of know-how to an Israeli company is required, and may be granted if the recipient abides by the provisions of
applicable laws, including the restrictions on the transfer of know-how and the manufacturing rights outside of Israel and the
obligation to pay royalties, and 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. No assurance can be given that approval to any such transfer, if requested, will be
granted.



These
restrictions may impair our ability to perform or outsource manufacturing outside of Israel, or otherwise transfer or sell TyrNovo’s
OCS funded know-how outside of Israel. It may also require TyrNovo to obtain the approval of the OCS for certain actions and transactions
and pay additional royalties and other amounts to the OCS. Furthermore, the consideration available to TyrNovo’s and/or our shareholders
in a transaction involving the transfer outside of Israel of know-how developed with OCS funding (such as a merger or similar
transaction) may be reduced by any amounts that TyrNovo is required to pay to the OCS. If TyrNovo fails to comply with the requirements
of the Innovation Law, TyrNovo may be required to refund certain grants previously received along with interest and penalties,
and may become subject to criminal proceedings.



The OCS is in the process
of adopting rules which deal with granting of licenses to use know-how developed as a result of research financed by the OCS for
R&D purposes. Such rules may have an effect on TyrNovo, with respect to the amount of payments to the OCS for the grant of
sub-licenses to third parties. In addition, pursuant to Amendment No. 7, the Innovation Authority, a statutory corporation, was
established on January 1, 2016 and has replaced the OCS. The Innovation Authority is authorized to change the current restrictions
imposed on recipients of grants under the R&D Law with a new set of arrangements in connection with ownership obligations
of know-how (including with respect to restrictions on transfer of know-how and manufacturing activities outside of Israel), as
well as royalties obligations associated with approved programs. As of the date of this annual report on Form 20-F, we are unable
to determine whether the Innovation Authority will promulgate new set of arrangements or adopt the arrangements which were stipulated
under the R&D Law as existed prior to the amendment. Therefore, as of the date of this annual report on Form 20-F, we are
unable as assess the effect, if any, of the promulgation of such arrangements on us and/or TyrNovo.







18






Risks
Related to Our Industry



Even
if our therapeutic candidates receive regulatory approval or do not require regulatory approval, they may not become commercially
viable products.



Even
if KIT-302, NT219, or any other therapeutic candidate that we may develop in the future, are approved for commercialization, they
may not be commercially viable products. For example, if we or our potential commercialization partners receive regulatory approval
to market a therapeutic candidate, approval may be subject to limitations on the indicated uses or subject to labeling or marketing
restrictions which could materially and adversely affect the marketability and profitability of the therapeutic candidate. In
addition, a new therapeutic candidate may appear promising at an early stage of development or after preclinical and/or clinical
trials but never reach the market, or it may reach the market but not result in sufficient product sales, if any. A therapeutic
candidate may not result in commercial success for various reasons, including:



| | ● | difficulty
    in large-scale manufacturing, including yield and quality;                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | low
    market acceptance by physicians, healthcare payers, patients and the medical community as a result of lower demonstrated clinical
    safety or efficacy compared to other products, prevalence and severity of adverse side effects, or other potential disadvantages
    relative to alternative treatment methods;
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | insufficient
    or unfavorable levels of reimbursement from government or third-party payers, such as insurance companies, health maintenance
    organizations and other health plan administrators;                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | infringement
    on proprietary rights of others for which we or our potential commercialization partners have not received licenses;                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | incompatibility
    with other therapeutic candidates;                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | other
    potential advantages of alternative treatment methods and competitive forces that may make it more difficult for us to penetrate
    a particular market segment;                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | ineffective
    marketing and distribution support;                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | lack
    of significant competitive advantages over existing products on the market;                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | lack
    of cost-effectiveness; or                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                              
| | ● | timing
    of market introduction of competitive products.                                                                                                                                                                                                                                                                   



Physicians,
various other health care providers, patients, payers or the medical community in general may be unwilling to accept, utilize
or recommend any of our approved therapeutic candidates. If we are unable, either on our own or through third parties, to manufacture,
commercialize and market our proposed therapeutic candidates when planned, or develop commercially viable therapeutic candidates,
we may not achieve any market acceptance or generate revenue.



The
market for our therapeutic candidates is rapidly changing and competitive, and new drug delivery mechanisms, drug delivery technologies,
new drugs and new treatments which may be developed by others could impair our ability to maintain and grow our business and remain
competitive.



The
pharmaceutical and biotechnology industry is highly competitive, and we face significant competition from many pharmaceutical,
biopharmaceutical and biotechnology companies that are researching and marketing products designed to address the indications
for which we are currently developing therapeutic candidates or for which we may develop therapeutic candidates in the future.
There are various other companies that currently market or are in the process of developing products that address all of the indications
or diseases treated by our therapeutic candidates.



New
drug delivery mechanisms, drug delivery technologies, new drugs and new treatments that have been developed or that are in the
process of being developed by others may render our therapeutic candidates noncompetitive or obsolete, or we may be unable to
keep pace with technological developments or other market factors. Some of these technologies may have an entirely different platform
or means of treating the same indications as KIT-302, NT219, or other therapeutic candidates that we may develop in the future.
Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others is intense
and is expected to increase. Many of these entities have significantly greater research and development capabilities, human resources
and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial resources. These entities
represent significant competition for us. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies
by large corporations could increase such competitors’ financial, marketing, manufacturing and other resources.





19






The
potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations or
therapeutic candidates, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medications
or drug delivery technologies. These treatments may be widely accepted in medical communities and have a longer history of use.
The established use of these competitive drugs may limit the potential for our therapeutic candidates to receive widespread acceptance
if commercialized.



If
third-party payers do not adequately reimburse customers for any of our therapeutic candidates that are approved for marketing,
they might not be purchased or used, and our revenues and profits will not develop or increase.



Our
revenues and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved therapeutic
candidates, if any, from governmental or other third-party payers, both in the U.S. and in foreign markets. Reimbursement by a
third-party payer may depend upon a number of factors, including the third-party payer’s determination that the use of an
approved therapeutic candidate is, among others:



| | ● | a
    covered benefit under its health plan;                               
| | - | ---------------------------------------------------------------------------
| |   |                                                                            
| | ● | safe,
    effective and medically necessary;                               
| |   |                                                                            
| | ● | appropriate
    for the specific patient;                                  
| |   |                                                                            
| | ● | cost-effective,
    including compared to approved alternate therapies; and
| |   |                                                                            
| | ● | neither
    experimental nor investigational.                              



Obtaining
reimbursement approval for a therapeutic candidate from each government or other third-party payer is a time-consuming and costly
process that could require us or our current or potential development and commercialization partners to provide supporting scientific,
clinical and cost-effectiveness data for the use of our therapeutic candidates to each payer. Even when a payer determines that
a therapeutic candidate is eligible for reimbursement, the payer may impose coverage limitations that preclude payment for some
uses that are approved by the FDA or other foreign regulatory authorities. Reimbursement rates may vary according to the use of
the therapeutic candidate and the clinical setting in which it used, may be based on payments allowed for lower-cost products
that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary
constraints or imperfections in Medicare, Medicaid or other data used to calculate these rates.



In
the U.S., there have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures
for medical products and services which may affect payments for our therapeutic candidates in the U.S. We believe that legislation
that reduces reimbursement for our therapeutic candidates could adversely impact how much or under what circumstances healthcare
providers will prescribe or administer our therapeutic candidates, if approved. This could materially and adversely impact our
business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our therapeutic
candidates, if approved. At this stage, we are unable to estimate the extent of the direct or indirect impact of any such federal
and state proposals.



Further,
the Centers for Medicare and Medicaid Services (CMS) frequently change product descriptors, coverage policies, product and service
codes, payment methodologies and reimbursement values. Third-party payers often follow Medicare coverage policy and payment limitations
in setting their own reimbursement rates, and both the CMS and other third-party payers may have sufficient market power to demand
significant price reductions.





20






Legislative
or regulatory reform of the healthcare system in the United States may harm our future business.



On
March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March
30, 2010, the President signed the “Health Care and Education Reconciliation Act” (P.L. 111-152), collectively commonly
referred to as the “Healthcare Reform Law.” The Health Reform Law included a number of new rules regarding health
insurance, the provision of health care, and conditions to reimbursement for healthcare services provided to Medicare and Medicaid
patients. Through the rule making process, substantial changes have been and continue to be made to the current system for paying
for healthcare in the United States, including changes made in order to extend medical benefits to tens of millions of Americans
who lacked insurance coverage and to contain healthcare costs. Extending coverage to a large population could substantially change
the structure of the health insurance system and the methodology for reimbursing medical services and drugs. This legislation
has been one of the most comprehensive and significant reforms ever experienced by the United States in the healthcare industry,
and it has significantly changed the way healthcare is financed by both governmental and private insurers. This legislation has
impacted the scope of healthcare insurance and incentives for consumers and insurance companies, among others. Additionally, the
Healthcare Reform Law’s provisions are designed to encourage providers to find cost savings in their clinical operations.
Pharmaceuticals represent a significant portion of the cost of providing care. Through modified reimbursement rates and other
incentives, the United States government is requiring that providers identify the most cost-effective services, supplies and pharmaceuticals.
This environment has caused changes in the purchasing habits of providers and resulted in specific attention to the pricing negotiation,
product selection and utilization review surrounding pharmaceuticals. To the extent that our therapeutic candidates are at some
point reimbursable by U.S federal government programs, this attention may result in our therapeutic candidates being chosen less
frequently or the pricing being substantially lowered. Some of the provisions of the Healthcare Reform Law have not yet been fully
implemented and the continued effect of the legislation is difficult to predict and, at this stage, we are unable to estimate
the full extent of the direct and/or indirect impact of the legislation on us.



These
structural changes could entail further modifications to the existing system of private payors and government programs (such as
Medicare, Medicaid and state Children’s Health Insurance Program), creation of a government-sponsored healthcare insurance
source, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the United States
could impact the reimbursement for prescribed drugs and pharmaceuticals, such as those we and our development and/or commercialization
partners are currently developing. If reimbursement for our approved therapeutic candidates, if any, is substantially reduced
in the future, or rebate obligations associated with them are substantially increased, our business could be materially and adversely
impacted.



Extending
medical benefits to those who previously lacked coverage may, in the long term, result in substantial cost to the United States
federal government, which may force significant additional changes to the healthcare system in the United States. Much of the
funding for expanded healthcare coverage may be sought through cost savings. While some of these savings may come from realizing
greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care,
much of the cost savings may come from reducing the cost of care and increased enforcement activities. Cost of care could be reduced
by decreasing the level of reimbursement for medical services or products (including those pharmaceuticals currently being developed
by us or our development and/or commercialization partners), or by restricting coverage (and, thereby, utilization) of medical
services or products. In either case, a reduction in the utilization of, or reimbursement for, any therapeutic candidate for which
we receive marketing approval in the future could have a materially adverse effect on our financial performance.



Several
States and private entities initially mounted legal challenges to the healthcare reform legislation, and they continue to litigate
various aspects of the legislation. On July 26, 2012, the United States Supreme Court generally upheld the healthcare reform legislation
as constitutional. However, the Supreme Court held that the legislation improperly required the States to expand their Medicaid
programs to cover more individuals. As a result, the States have a choice as to whether they will expand the numbers of individuals
covered by their respective State Medicaid programs. Some States have determined that they will not expand their Medicaid programs
and will develop other cost saving and coverage measures to provide care to currently uninsured residents. Many of these efforts
to date have included the institution of Medicaid managed care programs. The manner in which these cost saving measures are implemented
could have a materially adverse effect on our financial performance. Further, the healthcare regulatory environment has seen significant
changes in recent years and is still in flux. Legislative initiatives to modify or repeal the Healthcare Reform Law and judicial
challenges continue, including a recent executive order issued by the recently-elected U.S. President directing government agencies
and departments to minimize the economic burden of the Healthcare Reform Law to the extent permitted by law, and, notwithstanding
the recent failure of the Congress to abolish much of the Healthcare Reform Law, may continue or even increase in light of the
change in administrations following the most recent presidential election. We cannot predict the impact on our business of future
legal challenges to the Healthcare Reform Legislation or other changes to the current laws and regulations.





21






We
are subject to additional federal and state laws and regulations relating to our business, and our failure to comply with those
laws could have a material adverse effect on our results of operations and financial conditions.



Upon
the commencement of marketing products in the United States, we will become subject to additional healthcare regulation and enforcement
by the federal government and the states in which we conduct or will conduct our business. The laws that may affect our ability
to operate include, but are not limited to, the following:



| | ● | the
    federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving,
    offering or paying remuneration, directly or indirectly, in exchange for or to induce 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 government healthcare
    programs such as the Medicare and Medicaid programs;                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | the
    federal Anti-Inducement Law (also known as the Civil Monetary Penalties Law), which prohibits a person from offering or transferring
    remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence
    the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service for which payment
    may be made, in whole or in part, by Medicare or a State health care program;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | the
    Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, which prohibits physicians from referring
    Medicare or Medicaid patients for certain designated health services where that physician or its family member has a financial
    relationship with the entity providing the designated health service, unless an exception applies;                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | federal
    false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented,
    claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent;                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | the
    so-called federal “Sunshine Act”, which requires certain pharmaceutical and medical device companies to monitor
    and report certain financial relationships with physicians and other healthcare providers to CMS for disclosure to the public;                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | the
    Federal Food, Drug, and Cosmetic Act, which, among other things, strictly regulates drug product and medical device marketing,
    prohibits manufacturers from marketing such products for off-label use, and regulates the distribution of samples;                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | federal
    criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating
    to healthcare matters; and                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ● | state
    law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or
    services reimbursed by any third-party payer, including commercial insurers.                                                                                                                                                                                                                                                                         



Further,
the Healthcare Reform Law, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare
fraud statutes. A person or entity can now be found guilty of fraud or an anti-kickback violation without actual knowledge of
the statute or specific intent to violate it. In addition, the Healthcare Reform Law provides that the government may assert that
a claim including items or services resulting from a violation of the federal Anti-Kickback Statue constitutes a false or fraudulent
claim for purposes of the False Claims Act (31 U.S.C. 3729–3733). Possible sanctions for violation of these anti-kickback
laws include monetary fines, civil and criminal penalties, exclusion from Medicare, Medicaid and other government programs and
forfeiture of amounts collected in violation of such prohibitions. Any violations of these laws, or any action against us for
violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation,
business, results of operations and financial condition.



The
Healthcare Reform Law also imposes reporting requirements on certain medical devices and pharmaceutical manufacturers, among others,
to make annual public disclosures of certain payments or other transfers of value to physicians and teaching hospitals and ownership
or investment interests held by physicians or their immediate family members. Failure to submit required information may result
in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing
failures”), for all payments, transfers of value or ownership or investment interests that are not reported. Manufacturers
were required to begin data collection on August 1, 2013 and report such data to the CMS by March 31 each year. CMS made the data
publicly available on its searchable database beginning in September 2014.





22






In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing,
medical directorships, and other purposes. Some states, such as California, Massachusetts and Vermont, mandate implementation
of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians,
and some states limit or prohibit such gifts.



Most
recently, there has been a trend in federal and state legislation aimed at requiring pharmaceutical companies to disclose information
about their production and marketing costs, and ultimately in lowering costs for drug products. Several states have introduced
bills that would require disclosure of certain pricing information for prescription drugs that have no threshold amount or are
above a certain annual wholesale acquisition cost, and in June 2016 Vermont became the first state to pass legislation requiring
certain drug companies to disclose information relating to justification of certain price increases. The U.S. Congress has also
introduced bills targeting prescription drug price transparency.



Any
such implementation of this type of legislation requiring publication of drug costs could materially and adversely impact our
business by promoting a reduction in drug prices. As such, patients may choose to use other low-cost, established drugs or therapies.



The
scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially
in light of the lack of applicable precedent and regulations. We cannot predict the impact on our business of any changes in these
laws. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge
could have a material adverse effect on our reputation, business, results of operations, and financial condition. Any state or
federal regulatory review of us, regardless of the outcome, would be costly and time-consuming.



We
could be exposed to significant drug product liability claims, which could be time consuming and costly to defend, divert management
attention and adversely impact our ability to obtain and maintain insurance coverage.



The
clinical trials that we conduct, and the testing, manufacturing, marketing and commercial sale of our therapeutic candidates,
involve and will involve an inherent risk that significant liability claims may be asserted against us. We currently have a clinical
trial liability policy that includes coverage for our clinical trials. Should we decide to seek additional insurance against such
risks before our product sales commence, there is a risk that such insurance will be unavailable to us, or if it can be obtained
at such time, that it will be available only at an unaffordable cost. Even if we obtain insurance, it may prove inadequate to
cover claims or litigation costs, especially in the case of wrongful death claims. Product liability claims or other claims related
to our therapeutic candidates, regardless of their outcome, could require us to spend significant time and money in litigation
or to pay significant settlement amounts or judgments. Any successful product liability or other claim may prevent us from obtaining
adequate liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance
coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the
commercialization of our products and therapeutic candidates. A product liability claim could also significantly harm our reputation
and delay market acceptance of our therapeutic candidates.



Unfavorable
global economic conditions could adversely affect our business, financial condition or results of operations.



Our
results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
An economic downturn could result in a variety of risks to our business, including weakened demand for our therapeutic candidates
and our inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also
strain our partners and suppliers, possibly resulting in supply disruption, or cause future customers to delay making payments
for our products. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic
climate and financial market conditions could adversely impact our business.





23






Our
business involves risks related to handling regulated substances which could severely affect our ability to conduct research and
development of our therapeutic candidates.



In
connection with our current or potential development and commercialization partners’ research and clinical development activities,
as well as the manufacture of materials and therapeutic candidates, we and our current or potential development and commercialization
partners are subject to foreign, federal, state and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and wastes.
We and our current or potential development and commercialization partners may be required to incur significant costs to comply
with environmental and health and safety regulations in the future. Our research and clinical development, as well as the activities
of our manufacturing and current or potential development and commercialization partners, both now and in the future, may involve
the controlled use of hazardous materials, including but not limited to certain hazardous chemicals. We cannot completely eliminate
the risk of accidental contamination or injury from these materials. In the event of such an occurrence, we could be held liable
for any damages that result and any such liability could exceed our resources.



Risks
Related to Legal Proceedings and Intellectual Property



Legal
proceedings or third-party claims of intellectual property infringement and other legal challenges may require us to spend substantial
time and money and could prevent us from developing or commercializing our therapeutic candidates. An adverse result in these
infringements and other legal challenges could have a material adverse effect on our business, results of operations and financial
condition.



The
development, manufacture, use, offer for sale, sale or importation of our therapeutic candidates may infringe on the claims of
third-party patents or other intellectual property rights. The nature of claims contained in unpublished patent filings around
the world is unknown to us, and it is not possible to know which countries patent holders may choose for the extension of their
filings under the Patent Cooperation Treaty, or other mechanisms. We may also be subject to claims based on the actions of employees
and consultants with respect to the usage or disclosure of intellectual property learned at other employers. The cost to us of
any intellectual property litigation or other infringement proceeding, even if resolved in our favor, could be substantial. Some
of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially
greater financial resources. Uncertainties resulting from the initiation and continuation or defense of intellectual property
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Intellectual
property litigation and other proceedings may also absorb significant management time. Consequently, we are unable to guarantee
that we will be able to manufacture, use, offer for sale, sell or import our therapeutic candidates in the event of an infringement
action.



In
the event of patent infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third
party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable
terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could potentially limit our
competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic candidate or be forced to cease some
aspect of our business operations if, as a result of actual or threatened patent infringement or other claims, we are unable to
enter into licenses on acceptable terms. This inability to enter into licenses could harm our business significantly.



From time to time, we may
also be involved in various lawsuits and legal proceedings other than intellectual property infringement actions, concerning such
laws as corporate and securities laws, business laws, product liability laws, and environmental laws. On December 3, 2015, we
announced that we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant to the Class Action
Lawsuits Law 5766-2006 (which was filed against us and our directors at the Tel Aviv District Court (Economic Division). The Motion
asserts claims for damages to the holders of our securities listed on the TASE, arising due to the initial public offering of
our securities in the U.S. during November 2015. Additionally, on February 16, 2017, we announced that four
lawsuits and motions to approve the lawsuits as a class action lawsuit were filed against us and certain of our office holders
at the Tel Aviv District Court (Economic Division), and served on us, with each such motion relating to the formal investigation
by the Israeli Securities Authority (ISA) into our public disclosures. In addition, class actions lawsuits largely relating to
the same matters were filed in the State of California and in the U.S. federal courts against us, our CEO and CFO, and in the
California lawsuits, against the underwriters of our November 2015 initial public offering in the U.S.A. (collectively, “Investigation
Motions”).







24






The
above noted motions and class actions could result in significant legal defense costs and high punitive damage payments. Although
we maintain directors’ and officers’ liability insurance, with an extension to cover the Company as well, the insurance
companies may reject our claims for coverage under the policy or the coverage may not be adequate to cover future claims. Furthermore,
to the extent that we may be required to indemnify our underwriters for their legal defense costs or any other damages, such indemnification
would not be covered under the policy. Additionally, we may be unable to maintain our existing directors’ and officers’
liability insurance in the future at satisfactory rates or adequate amounts. With respect to the motion from December 2015, we
have been advised by our attorneys that the likelihood of the Company not incurring any financial obligation as a result of such
class action exceeds the likelihood that the Company will incur a financial obligation. At this preliminary stage however, we
are unable, with any degree of certainty, to make any other evaluations or any other assessments with respect to the probability
of success or the scope of potential exposure, if any, of any of the Investigation Motions. For more information see “Item
8 – Financial Information – Legal Proceedings”.



It
is difficult to foresee the results of legal actions and proceedings currently involving us or those which may arise in the future,
and an adverse result in these matters could have a material adverse effect on our business, results of operations and financial
condition. In addition, any legal or administrative proceedings which we are subject to could require the significant involvement
of our senior management, and may divert management attention from our business and operations.



We
may be subject to material fines, penalties and other sanctions and other adverse consequences arising out of the Company’s
ongoing Israeli Securities Authority investigation, related class action lawsuits and related matters.



We
operate in a complex legal and regulatory environment, and any failure or possible failure to comply with applicable laws, rules
and regulations may result in civil and/or criminal legal proceedings. In Israel, the Company is currently subject to a formal
investigation by the Israeli Securities Authority (the “ISA” and the “Investigation,” respectively) into
its public disclosures around certain aspects of the studies related to its lead therapeutic candidate, KIT-302. The Company has
not yet been advised by the ISA of the full scope and focus of the Investigation. However, in order to provide additional information
regarding the investigation to the Company’s investors and the public, the Company has had discussions with the ISA in order to
obtain certain additional information which may be disclosed to the Company’s shareholders. Based on these discussions with
the ISA, the Company believes that the Investigation with respect to the Company relates to the Data Monitoring Committee (“DMC”)
appointed in connection with the Company’s Phase III trial of KIT-302.



We
cannot predict at this time the impact on us as a result of the Investigation and accordingly cannot assure you that we will not
be materially and adversely affected. Responding to such an investigation is costly and involves a significant diversion of management’s
attention. Such proceedings are unpredictable and may develop over lengthy periods of time. Future settlements may involve large
cash penalties. The ISA has a broad range of civil and criminal penalties it may seek to impose (on the Company and/or individuals),
and the Company and/or officer holders may be required to pay material fines and/or penalties. The Company and/or office holders
may be subject to injunctions or limitations on future conduct, or suffer other criminal or civil penalties or adverse impacts,
including additional lawsuits by private litigants. Any one or more of the foregoing could have a material adverse effect on our
reputation and our business, financial condition or results of operations. For more information on the Investigation see “Item
8 – Financial Information – Legal Proceedings”.



We
may be unable to adequately protect or enforce our rights to intellectual property, causing us to lose valuable rights. Loss of
patent rights may lead us to lose market share and potential profits.



Our
success depends, in part, on our ability, and the ability of our current or potential development and commercialization partners
to obtain patent protection for our therapeutic candidates, maintain the confidentiality of our trade secrets and know-how, operate
without infringing on the proprietary rights of others and prevent others from infringing our proprietary rights.





25






We
try to protect our proprietary position by, among other things, filing U.S., European, and other patent applications related to
our therapeutic candidates, inventions and improvements that may be important to the continuing development of our therapeutic
candidates.



Because
the patent position of pharmaceutical companies involves complex legal and factual questions, we cannot predict the validity and
enforceability of any patents we may obtain with certainty. Our competitors may independently develop drug delivery technologies
or products similar to ours or design around or otherwise circumvent any patents that may be issued to or licensed by us. Our
pending patent applications, and those that we may file in the future or those we may license from third parties may not result
in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages.
The degree of future protection to be afforded by our proprietary rights is uncertain because legal means afford only limited
protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.



Patent
rights are territorial; thus, the patent protection we have sought will only extend, if issued, to those countries, if any, in
which we will be issued patents. Even so, the laws of certain countries do not protect our intellectual property rights to the
same extent as do the laws of the U.S. and the European Union. Competitors may successfully challenge any of our patents, produce
similar drugs or products that do not infringe such patents, or produce drugs in countries where we have not applied for patent
protection or that do not respect such patents. Furthermore, it is not possible to know the scope of claims that will be allowed
in published applications and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable
in a court of law.



After
the completion of development and registration of any future patents, third parties may still act to manufacture or market our
therapeutic candidates in infringement of our patent protected rights. Such manufacture or marketing of our therapeutic candidates
in infringement of any patent-protected rights is likely to cause us damage and lead to a reduction in the prices of our therapeutic
candidates, thereby reducing our potential profits.



We
may invest a significant amount of time and expense in the development of our therapeutic candidates only to be subject to significant
delay and patent litigation before they may be commercialized. In addition, due to the extensive time needed to develop, test
and obtain regulatory approval for our therapeutic candidates, any patents that may be issued that protect our therapeutic candidates
may expire early during commercialization. This may reduce or eliminate any market advantages that such patents may give us. Following
patent expiration, we may face increased competition through the entry of generic products into the market and a subsequent decline
in market share and profits.



We
are developing some of our therapeutic candidates in collaboration with academic and other research institutes. While we attempt
to ensure that our intellectual property is protected under the terms of our collaboration agreements with such institutes, these
institutes may have claims to our intellectual property.



If
we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others
to compete against us.



In
addition to filing patents, we generally try to protect our trade secrets, know-how and technology by entering into confidentiality
or non-disclosure agreements with parties that have access to it, such as our current or potential development and commercialization
partners, employees, contractors and consultants. We also enter into agreements that purport to require the disclosure and assignment
to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research collaborators,
contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce or
may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally
disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to,
or independent development by, a competitor of any trade secret, know-how or other technology not protected by a patent could
materially adversely affect any competitive advantage we may have over any such competitor.



To
the extent that any of our employees, advisors, research collaborators, contractors or consultants independently develop, or use
independently developed, intellectual property in connection with any of our projects, disputes may arise as to the proprietary
rights to this type of information. If a dispute arises with respect to any proprietary right, enforcement of our rights can be
costly and unpredictable and a court may determine that the right belongs to a third party.





26






We
may be subject to other patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.



In
addition to infringement claims against us, we may in the future become a party to other patent litigation or proceedings before
regulatory agencies, including interference or re-examination proceedings filed with the U.S. Patent and Trademark Office (USPTO)
or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to our therapeutic
candidates, as well as other disputes regarding intellectual property rights with our current and potential development and commercialization
partners, or others with whom we have contractual or other business relationships. Post-issuance oppositions are not uncommon
and we and our current and potential development and commercialization partners will be required to defend these opposition procedures
as a matter of course. Opposition procedures may be costly, and there is a risk that we may not prevail.



Risks
Related to our Operations in Israel



It
may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the U.S., or to serve process
on our officers and directors.



We
are incorporated in Israel. Most of our executive officers and directors reside outside of the U.S., and all of our assets and
most of the assets of our executive officers and directors are located outside of the U.S. Therefore, a judgment obtained against
us or such executive officers and our directors in the U.S., including one based on the civil liability provisions of the U.S.
federal securities laws, may not be collectible in the U.S. and may not be enforced by an Israeli court. It may also be difficult
for you to affect service of process on these persons in the U.S. or to assert U.S. securities law claims in original actions
instituted in Israel. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not
United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United
States law must be proven as a fact by expert witnesses, 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 that addresses the matters described
above. As a result of the difficulty associated with enforcing a judgment against us in Israel, it may be impossible to collect
any damages awarded by either a U.S. or foreign court.



Claims
for indemnification by our directors and officers may reduce our available funds to satisfy successful shareholder claims against
us and may reduce the amount of money available to us.



The
Companies Law and our amended and restated articles of association permit us to indemnify our directors and officers for acts
performed by them in their capacity as directors and officers. The Companies Law and our amended and restated articles of association
provide that a company may not exempt or indemnify a director or an office holder nor enter into an insurance contract, which
would provide coverage for any monetary liability incurred as a result of (a) a breach by the director or officer of his duty
of loyalty, except for insurance and indemnification where the director or officer acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company; (b) a breach by the director or officer of his duty of care if the breach
was done intentionally or recklessly, except if the breach was solely as a result of negligence; (c) any act or omission done
with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary sanctions, or forfeit imposed on
the officer or director. See Item 6. Directors, Senior Management and Employees – C. Board Practices – Exculpation,
Insurance and Indemnification of Directors and Officers.



Kitov
Parent has issued letters of indemnification to our directors and officers, pursuant to which we have agreed to indemnify them
in advance for any liability or expense imposed on or incurred by them in connection with acts they perform in their capacity
as a director or officer, subject to applicable law. The amount of the advance indemnity will not exceed 25% of Kitov Parent’s
then consolidated shareholders’ equity, per its most recent consolidated annual financial statements.





27






Our
indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their
duties as directors by shifting the burden of such losses and expenses to us. Although we have obtained directors’ and officers’
liability insurance, certain liabilities or expenses covered by our indemnification obligations may not be covered by such insurance
or the coverage limitation amounts may be exceeded.



As
a result of the class action motions and lawsuits or other claims which may be filed against our directors and officers, we may
need to use a significant amount of our funds to satisfy our indemnification obligations, which could severely harm our business
and financial condition and limit the funds available to shareholders who may choose to bring a claim against our company. See
the risk factor titled “Legal proceedings or third-party claims of intellectual property infringement and other legal challenges
may require us to spend substantial time and money and could prevent us from developing or commercializing our therapeutic candidates.
An adverse result in these infringements and other legal challenges could have a material adverse effect on our business, results
of operations and financial conditions” under the risk factor section titled “Risks Related to Legal Proceedings and
Intellectual Property”.



These
provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their
duties, and may similarly discourage the filing of derivative litigation by our shareholders against the directors and officers
even though such actions, if successful, might otherwise benefit our shareholders.



In
the event we do not satisfy the requirements for a tax-free merger of Kitov Pharmaceuticals with and into Kitov Parent, Kitov
Pharmaceuticals may be subject to a material tax liability.



The
board of directors of each of Kitov Parent and Kitov Pharmaceuticals has approved the merger of Kitov Pharmaceuticals with and
into Kitov Parent, with Kitov Parent as the surviving company. Based on our analysis, the merger satisfies the requirements for
a tax-free merger under Israeli tax law, which includes amongst other requirements, which are applicable to Kitov: that the merger
is being considered for business and economic purposes and that the primary goal of the merge is not tax avoidance or tax reduction;
compliance with certain limitations on selling off most of each of the companies’ assets should not be sold during the period
two years after the end of the tax year in which the change in the structure occurs; the merged company will continue its main
business activity in the same way it did prior to the merger; and operating losses carried forward (of both the participating
companies) may be deducted in the reports of the merged company, at the lower of a rate of 20% of the losses transferred each
year, or up to 50% of the taxable income of the merged company. In the event the Israel Tax Authority does not agree with our
analysis, Kitov Pharmaceuticals may be subject to a material tax amount on account of the sale equal to the value of its assets
on the date of transfer minus the cost basis for such assets. Such a tax liability may have a material adverse effect on our financial
results.



We
conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel and its region.



We
are incorporated under the laws of the State of Israel, our principal offices are located in central Israel and some of our officers,
employees, consultants and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel
and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption
or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and results
of operations and could make it more difficult for us to raise capital. In 2008, 2012, and again in the summer of 2014, Israel
was engaged in an armed conflict with Hamas, a militia group and political party operating in the Gaza Strip, and during the summer
of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party.
These conflicts involved missile strikes against civilian targets in various parts of Israel, and negatively affected business
conditions in Israel. Political uprisings and civil resistance demonstrations in various countries in the Middle East, including
Egypt, Iraq and Syria, have affected the political stability of those countries. It is not clear how this instability, will develop
and how it will affect the political and security situation in the Middle East. This instability may lead to deterioration of
the political relationships that exist between Israel and these countries, and have raised concerns regarding security in the
region and the potential for armed conflict. The tension between Israel and Iran or extremist groups in the region, such as Hamas
in Gaza and Hezbollah in Lebanon, may escalate in the future and turn violent, which could affect the Israeli economy generally
and us in particular. Any armed conflicts, terrorist activities or political instability in the region could adversely affect
business conditions and could harm our results of operations. Parties with whom we may do business have sometimes declined to
travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. The
conflict situation in Israel could cause situations where medical product certifying or auditing bodies could not be able to visit
manufacturing facilities of our subcontractors in Israel in order to review our certifications or clearances, thus possibly leading
to temporary suspensions or even cancellations of our product clearances or certifications. The conflict situation in Israel could
also 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.





28






Our
commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the
Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist
attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred
by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely
negatively affect business conditions and could harm our results of operations.



Further,
in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict
business and trade activity with the State of Israel and with Israeli companies, and additional countries may impose restrictions
on doing business with Israel and Israeli companies if hostilities in the region continue or intensify. Such restrictions may
seriously limit our ability to sell our products to customers in those countries.



Any
of the factors set forth above may have an adverse impact on our operating results, financial condition or the expansion of our
business.



Kitov
Parent owns a majority interest in its subsidiary, TyrNovo. As a majority shareholder under the Israeli Companies Law Kitov Parent
owes certain fiduciary duties to the non-controlling shareholders of TyrNovo and must share dividends and distributions with these
non-controlling shareholders. In addition, in a stay of proceedings, reorganization or bankruptcy scenario, certain controlling
shareholder loans may become subordinated to other obligations of TyrNovo.



Kitov
Parent presently owns a controlling majority stake in TyrNovo, as well as the majority of TyrNovo’s presently outstanding
debt obligations. All the ordinary shares of TyrNovo that are not owned by Kitov Parent are privately held. In order to satisfy
whatever fiduciary obligations Kitov Parent may have under applicable law or other governing documents to the non-controlling
shareholders of TyrNovo, Kitov Parent endeavors to deal with TyrNovo at “arm’s-length.” Some transactions between
Kitov Parent and TyrNovo, including any cancellation of such transactions, may require the approval of the boards of directors
of TyrNovo and/or Kitov Parent, and, under certain circumstances, approval of the shareholders of TyrNovo and/or Kitov Parent
by special vote and are subject to the receipt of applicable permits and approvals, and therefore Kitov Parent’s ability
to control TyrNovo may be limited.



For
example, the current articles of association of TyrNovo require that any loans taken by TyrNovo receive unanimous consent of all
shareholders present at a shareholders meeting called in order to approve such loan. The same special majority would be required
in order to amend such provision in the articles of association. It is unclear if these provision apply to the Convertible Loans
to be provided to TyrNovo by the Company and/or Taoz, a minority shareholder of TyrNovo, pursuant to a Binding Term Sheet between
TyrNovo, Taoz and Kitov Parent which was confirmed under a final judgment entered into by
the Economic Division of the Tel Aviv District Court on February 9, 2017. As such, it is presently unclear ifKitov Parent
and/or Taoz can make investments into TyrNovo in the form of such Convertible Loans, nor
what might be the terms of any equity investments into TyrNovo in place of such Convertible Loans. For more information on the
Convertible Loans and the Court approved settlement, see Item 7. Major Shareholders and Related Party Transactions B. –
Related Party Transactions – TyrNovo Ltd.



In addition, any dividend
or distribution from TyrNovo requires the approval of the directors of TyrNovo and may be subject to restrictions imposed other
agreements to which they are party, and therefore there may be limits on the dividends or distributions Kitov Parent receives
from TyrNovo and from any commercialization of NT219. In addition, in a stay of proceedings, reorganization or bankruptcy scenario,
certain controlling shareholder loans may become subordinated to other obligations of the subsidiary, and Kitov Parent’s
priority rights over loans it has made to TyrNovo may be pushed back in such proceedings.







29






Provisions
of Israeli law and Kitov Parent’s amended and restated articles of association or TyrNovo’s articles of association
may delay, prevent or otherwise impede a merger with, or an acquisition of, the Company or TyrNovo, or an acquisition of a significant
portion of Kitov Parent’s or TyrNovo’s shares, which could prevent a change of control, and negatively affect the
market price of Kitov Parent’s ordinary shares.



Israeli
corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that
may be relevant to these types of transactions. These provisions of Israeli law may delay, prevent or make difficult an acquisition
of us, which could prevent a change of control and therefore depress the price of our shares, See “Item 10. Additional Information
– B. Memorandum and Articles of Association – Provisions restricting change in control of our company” for more
information.



Furthermore,
Israeli tax considerations may make potential transactions unappealing to us or to our shareholders, especially for those shareholders
whose country of residence does not have a tax treaty with Israel which exempts 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 a number of conditions,
including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of
shares of the participating companies are subject to certain restrictions. 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 disposition of the shares
has occurred.



Kitov
Parent’s amended and restated articles of association also contain provisions that could delay or prevent changes in control
or changes in our management. These provisions include matters in connection with the election and removal of directors, such
as Kitov Parent’s staggered board of directors, the appointment by Kitov Parent’s board of directors of additional
directors to fill vacancies on the board of directors, the size of the Kitov Parent’s board of directors, the terms of office
of Kitov Parent’s directors and the special majority of Kitov Parent’s voting rights required to amend such provision
in its amended and restated articles of association, See “Item 6. Directors, Senior Management and Employees – C.
Board Practices - Board of Directors and Officers” and “Item 10. Additional Information – B. Memorandum and
Articles of Association – Provisions restricting change in control of our company” for additional information.



In
addition, Kitov Parent has 1,000,000,000 shares of non-voting senior preferred shares authorized, which can be issued by its board
of directors, who can establish conversion, redemption, optional and other special rights, qualifications, limitations or restrictions,
if any, of the non-voting senior preferred shares, without further actions by Kitov Parent’s shareholders, unless shareholder
approval is otherwise required by applicable law, the rules of any exchange or other market on which its securities may then be
listed or traded, its articles of association then in effect, or any other applicable rules and regulations. Furthermore, in a
merger between Israeli corporations, if the non-surviving entity has more than one class of shares, the merger may need to be
approved by each class of shareholders, including any classes of otherwise non-voting shares, such as the non-voting senior preferred
shares authorized in Kitov Parent’s share capital.



Kitov Parent’s subsidiary,
TyrNovo, has obligations to the OCS with respect to grants from the OCS for certain research and development expenditures in connection
with TyrNovo’s technology. The terms of these grants may require us to satisfy specified conditions in order to manufacture
products and transfer technologies outside of Israel, which may impede our acquisition by, or a merger with, a foreign company.
For more information, see the risk factors in connection with OCS funding found under “Risks Related to Our Financial Condition
and Capital Requirements.”



These
and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, or an acquisition
of a significant portion of our shares, even if such an acquisition or merger would be beneficial to us or to our shareholders.
See “Item 10. Additional Information – B. Memorandum and Articles of Association
– Provisions Restricting Change in Control of Our Company” and “Item 10. Additional Information – E. Taxation—Israeli
Tax Considerations and Government Programs” for additional information.





30






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 U.S. dollar. Most of the royalty payments from potential development and commercialization
partners are expected to be payable in U.S. dollars, and we expect our revenues from future licensing agreements to be denominated
mainly in U.S. dollars or in Euros. We pay a portion of our expenses in U.S. dollars; however, a portion of our expenses, related
to salaries of the employees in Israel and payment to part of the service providers in Israel, are paid in NIS and in other currencies.
In addition, a portion of our financial assets is held in NIS. As a result, we are exposed to currency fluctuation risks. For
example, if the NIS strengthens against the U.S. dollar, our reported expenses in U.S. dollars may be higher than anticipated.
In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our financial assets held in NIS will decline.



Your
obligations and responsibilities as a shareholder will be governed by Israeli law which may differ in some respects from the obligations
and responsibilities of shareholders of U.S. companies. Israeli law may impose obligations and responsibilities on a shareholder
of an Israeli company that are not imposed upon shareholders of corporations in the U.S.



We
are incorporated under Israeli law. The obligations and responsibilities of the holders of our ordinary shares are governed by
our amended and restated articles of association and Israeli law. These obligations and responsibilities differ in some respects
from the obligations and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of
an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing its power
in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments
to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions
and related party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power
to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in
the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications
of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations
and responsibilities on holders of our ordinary shares and/or ADSs that are not typically imposed on shareholders of U.S. corporations.



Risks
primarily related to our ADSs and ordinary shares and other listed securities



We
have identified a material weakness in our internal control over financial reporting which, if not remediated, could adversely
affect our reputation, business or stock price.



As
described under “Item 15 - Controls and Procedures,” based on our evaluation of whether our existing internal controls
over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies
in our existing internal controls, our management, including the chief executive officer and chief financial officer, has concluded
that our disclosure controls and procedures as of the end of the period covered by this annual report, reflected a material weakness
in internal control over financial reporting that would require us to enhance our procedures and systems relating to financial
reporting, primarily due to the factor described below. A material weakness is a deficiency, or combination of deficiencies, in
internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual
or interim consolidated financial statements will not be prevented or detected on a timely basis.



A
deficiency was identified in our internal control over financial reporting related to the operation of the control to review the
accounting for significant non-routine and complex transactions to ensure proper application of IFRS. This control did not operate
effectively due to the lack of timely involvement of the qualified technical resources to perform the required management review.
As a result, during the audit process, an error was detected in the accounting for equity and derivative instruments, which was
corrected prior to filing our audited financial statements for 2016.





31






Although
we have developed and are implementing a plan to remediate this material weakness and believe, based on our evaluation to date,
that this material weakness will be remediated during 2017, we cannot assure you that this will occur within the contemplated
timeframe. Moreover, we cannot assure you that we will not identify additional material weaknesses in our internal control over
financial reporting in the future, nor that our disclosure controls and procedures will detect or uncover all failures of persons
within the Company to disclose material information otherwise required to be set forth in our reports. If we are unable to remediate
the material weakness, our ability to record, process and report financial information accurately, and to prepare financial statements
within the time periods specified by the rules and forms of SEC, could be adversely affected. The occurrence of or failure to
remediate the material weakness may adversely affect our reputation and business and the market price of our ordinary shares,
public warrants and any other securities we may issue.



We
incur increased costs as a result of operating as a public company in the U.S, and our management will be required to devote substantial
time to new compliance initiatives.



Kitov
Parent’s ADSs and public warrants have been traded on The NASDAQ Capital Market since November 20, 2015. As a public company
whose securities are listed in the United States, we incur accounting, legal and other expenses that we did not incur as a public
company listed on the TASE, including costs associated with our reporting requirements under the Exchange Act. We also anticipate
that we will incur costs associated with corporate governance requirements, including requirements under Section 404 and other
provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NASDAQ, and provisions of Israeli corporate
law applicable to public companies. We expect that these rules and regulations will increase our legal and financial compliance
costs, introduce new costs such as investor relations and stock exchange listing fees, and will make some activities more time-consuming
and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of such costs.



As
an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, we may take advantage
of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act (and the rules and regulations of the SEC thereunder).
When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring
compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public
company or the timing of such costs.



Pursuant
to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the SEC and the Public Company Accounting Oversight
Board, starting with this annual report on Form 20-F, and each subsequent annual report thereafter that we file with the SEC,
our management is required to report on the effectiveness of our internal control over financial reporting. In addition, once
we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions
related thereto discussed above and depending on our status as per Rule 12b-2 of the Exchange Act, our independent registered
public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section
404.



We
have only very recently commenced the process of determining whether our existing internal controls over financial reporting systems
are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal
controls. This process requires the investment of substantial time and resources, including by our chief financial officer and
other members of our senior management. As a result, this process may divert internal resources and take a significant amount
of time and effort to complete.



We
cannot predict the outcome of evaluations we will conduct, and whether we will need to implement additional remedial actions in
order to implement effective controls over financial reporting. The determination and any remedial actions required could result
in us incurring additional costs that we did not anticipate, including the hiring of outside consultants. Irrespective of compliance
with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations
and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent
auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to
our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it
could adversely affect our operations, financial reporting and/or results of operations and could result in an adverse opinion
on internal controls from our independent auditors and cause the market price of Kitov Parent’s ordinary shares, ADSs and
public warrants to decline.





32






Changes
in the laws and regulations affecting public companies will result in increased costs to us as we respond to their requirements.
These laws 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 or as executive officers. We
cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.



We
may be classified as a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes in 2017 and may continue
to be, or become, a PFIC in future years, which may have negative tax consequences for U.S. investors.



We
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 our gross
income is “passive income” or (ii) on average at least 50% of our assets by value produce passive income or are held
for the production of passive income. Based on our estimated gross income, the average value of our gross assets, and the nature
of our business, we believe that we may be classified as a PFIC in the current taxable year and may be treated, or may become,
a PFIC in future years. If we are treated as a PFIC for any taxable year during which a U.S. investor held our ordinary shares
or ADSs, certain adverse U.S. federal income tax consequences could apply to the U.S. investor. See “Item 10. Additional
Information – E. Taxation– Passive Foreign Investment Company Consequences.”



The
market price of Kitov Parent’s ordinary shares, ADSs and public warrants is subject to fluctuation, which could result in
substantial losses by investors.



The
stock market in general, and the market price of Kitov Parent’s ordinary shares on the TASE and its ADSs and Series A warrants
on The NASDAQ Capital Market in particular, are subject to fluctuation, and changes in the price of its listed securities may
be unrelated to our operating performance. The market prices of Kitov Parent’s ordinary shares on the TASE and its ADSs
and public warrants on The NASDAQ Capital Market have fluctuated in the past, and we expect it will continue to do so. The market
price of Kitov Parent’s ordinary shares, ADSs and public warrants are and will be subject to a number of factors, including:



| | ● | announcements
                                         of technological innovations or new therapeutic candidates by us or others;                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                       
| | ● | announcements
        by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;                  
| |   |                                                                                                                                                                       
| | ● | expiration
    or terminations of licenses, research contracts or other development or commercialization agreements;                                                  
| |   |                                                                                                                                                                       
| | ● | public
    concern as to the safety of drugs that we, our current or potential development and commercialization partners or others develop;                          
| |   |                                                                                                                                                                       
| | ● | the
    volatility of market prices for shares of biotechnology companies generally;                                                                                  
| |   |                                                                                                                                                                       
| | ● | success
    or failure of research and development projects;                                                                                                          
| |   |                                                                                                                                                                       
| | ● | departure
    of key personnel;                                                                                                                                       
| |   |                                                                                                                                                                       
| | ● | 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 Kitov Parent’s ordinary shares or ADSs or public
    warrants are covered by analysts;
| |   |                                                                                                                                                                       
| | ● | changes
    in government regulations or patent decisions;                                                                                                            
| |   |                                                                                                                                                                       
| | ● | developments
    by our current or potential development and commercialization partners; and                                                                          
| |   |                                                                                                                                                                       
| | ● | general
    market conditions and other factors, including factors unrelated to our operating performance.                                                            



These
factors and any corresponding price fluctuations may materially and adversely affect the market price of Kitov Parent’s
ordinary shares and ADSs and public warrants and result in substantial losses by investors.





33






Additionally,
market prices for listed securities of biotechnology and pharmaceutical companies historically have been very volatile. The market
for these listed securities has from time to time experienced significant price and volume fluctuations for reasons unrelated
to the operating performance of any one company. In the past, following periods of market volatility, shareholders have often
instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost
and divert resources and attention of management from our business, even if we are successful.



Future
sales of Kitov Parent’s ordinary shares or ADSs or other warrants or convertible securities could reduce the market price
of its ordinary shares and ADSs and other listed securities.



As
of April 25, 2017, we had an aggregate of 164,529,717 issued and outstanding ordinary shares (including 21 dormant ordinary shares
held in treasury) (such number of ordinary shares would be represented by 8,226,486 of Kitov Parent’s ADSs), no non-voting
senior preferred shares, 6,835,669 Series A or public warrants, representative’s warrants to purchase 157,945 of its ADSs,
which were granted to the underwriters as part of Kitov Parent’s initial U.S. offering in November 2015, placement agent’s
warrants to purchase 141,176 of its ADSs, which were granted to the placement agent as part of its follow-on U.S. offering in
July 2016, and 11,583,883 non-tradable options to purchase 9,932,523 ordinary shares, (such number of non-tradable options and
their underlying ordinary shares would be represented by 496,626 of its ADSs). We may also issue additional ordinary shares or
ADSs of Kitov Parent to the remaining shareholders of TyrNovo should we seek to acquire remaining shares of TyrNovo not currently
held by us. Substantial sales of Kitov Parent’s ordinary shares or ADSs or other warrants or securities convertible into
ordinary shares or ADSs, or the perception that such sales may occur in the future, including sales of ordinary shares or ADSs
issuable upon the exercise of options or the conversion of convertible securities, may cause the market price of Kitov Parent’s
ordinary shares or ADSs or other listed securities to decline. Moreover, the issuance of shares or ADSs in connection with the
future acquisition of additional shares of TyrNovo or pursuant to the conversion or exercise of options, warrants or any other
convertible securities Kitov Parent and/or TyrNovo may issue will also have a dilutive effect on Kitov Parent’s shareholders,
which could further reduce the price of its ordinary shares and ADSs and other listed securities on their respective exchanges.





Future sales of TyrNovo’s
ordinary shares or other warrants or convertible securities could dilute our holdings in TyrNovo, and reduce the value of TyrNovo
reflected in our holdings of TyrNovo and also reduce the market price of Kitov Parent’s ordinary shares and ADSs and other
listed securities.



As of April 25, 2017, Kitov
Parent held acontrolling equity interest in TyrNovo representing approximately 65%
of its issued and outstanding share capital. In addition we held a loan to TyrNovo of $101,157, the repayment date and other terms
of such which have not been determined. In addition Kitov Parent and TyrNovo entered into a Revolving Secured Facility and Pledge
Agreement on March 1, 2017, pursuant to which Kitov Parent has made loans to TyrNovo in an aggregate amount of $750,000. As part
of our settlement arrangements with Taoz – Company for Management and Holdings of
Companies Ltd. (“Taoz”), a minority shareholder in TyrNovo, Taoz is entitled for a certain period of time to invest
up to an additional $1,750,000 in TyrNovo by way of loan which are convertible into TyrNovo equity. Furthermore,in the
event that Kitov Parent increases its shareholdings in TyrNovo, through the purchase of additional shares from TyrNovo’s
other current shareholders, then for a certain period of time Taoz shall have the option to purchase from Kitov Parent up to 30%
of such newly acquired shares in TyrNovo. Such arrangements could serve to dilute Kitov Parent’s holdings in TyrNovo. Substantial
sales of TyrNovo’s ordinary shares or other warrants or securities convertible into ordinary shares of TyrNovo, may cause
the holdings of Kitov Parent in TyrNovo to be diluted, and such dilution, or the perception that such sales may occur in the future,
including sales of ordinary shares of TyrNovo issuable upon the exercise of options or the conversion of convertible securities
into shares of TyrNovo may cause the market price of Kitov Parent’s ordinary shares or ADSs or other listed securities to
decline.



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



As
a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise
required under the NASDAQ Listing Rules for U.S domestic issuers. We will follow home country practice in Israel with regard to
(1) director nomination procedures, as permitted by the Companies Law, under which either our board of directors, a group of directors,
or shareholder(s) holding sufficient portion of our share capital selects director nominees, subject to the terms of our amended
and restated articles of association. Directors are not selected, or recommended for board of director selection, as required
by the NASDAQ Listing Rules, by independent directors constituting a majority of the board’s independent directors or by
a nominations committee comprised solely of independent directors, and (2) quorum requirement at shareholders’ meetings,
as permitted under the Companies Law, under which and pursuant to our amended and restated articles of association, the quorum
required for an ordinary meeting of shareholders consists of at least two shareholders present in person or by proxy who hold
or represent at least 25% of the voting rights of our shares (and in an adjourned meeting, with some exceptions, any number of
shareholders), instead of 33 1/3% of the issued share capital required under the NASDAQ Listing Rules. In addition, we will follow
our home country law, instead of the NASDAQ Listing Rules, which require that we obtain shareholder approval for certain dilutive
events, such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in
a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest
in the company and certain acquisitions of the stock or assets of another company.



In
the future we may elect to follow additional home country corporate governance practices instead of those otherwise required under
the NASDAQ Listing Rules for U.S domestic issuers. Following our home country governance practices as opposed to the requirements
that would otherwise apply to a U.S. company listed on The NASDAQ may provide less protection than is accorded to investors under
the NASDAQ Listing Rules applicable to domestic issuers.





34






In
addition, as a foreign private issuer, we will be exempt from the rules and regulations under the U.S. Securities Exchange Act
of 1934, as amended or 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.



In
addition, we will not be required under the Exchange Act, to file annual, quarterly and current reports and financial statements
with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act. As our
ordinary shares are traded on the Tel Aviv Stock Exchange (“TASE”), while our ADSs and Series A warrants are traded
on The NASDAQ Capital Market, we currently also report to the ISA and the TASE in accordance with the provisions of Section 35XXXIII
of the Israel Securities Law, 5728-1968 and the Securities Regulations (Periodic and Immediate Reports of a Foreign Body Corporate)
5761-2000, promulgated thereunder (the “Dual-Listed Reporting Requirements”). Pursuant to the Dual-Listed Reporting
Requirements, we prepare our periodic and immediate reports in accordance with U.S. securities laws and reporting requirements,
as applicable to a foreign private issuer. We intend to file with the SEC, within 120 days after the end of each fiscal year ending
December 31, an annual report on Form 20-F containing financial statements which will be examined and reported on, with an opinion
expressed, by an independent registered public accounting firm. In accordance with the NASDAQ Listing Rules, as a foreign private
issuer we are required to submit on a Form 6-K an interim balance sheet and income statement as of the end of the second quarter
of each fiscal year. Furthermore, we have committed to the underwriters of our initial U.S public offering which was completed
in November 2015 that for a period of three (3) years from November 25, 2015, we, at our expense, will announce its financial
information for each of the first three fiscal quarters consistent with the practices of companies which are dual-listed on both
the Tel Aviv Stock Exchange and a domestic U.S. securities exchange and report in accordance with the Dual-Listed Reporting Requirements;
provided that the foregoing shall not apply in the event we enter into a merger transaction in which we are the non-surviving
entity that would cause our ADSs and warrants to no longer be registered under the Exchange Act. The Representative of the underwriters
of our initial U.S public offering which was completed in November 2015 has previously waived the announcement by us with respect
to the filing of quarterly financial information, and may issue such waivers to us in the future. It is noted that recent amendments
to the Israel Securities Law and regulations enacted thereunder, dispense with the requirement for the announcement of financial
results for each of the first and third fiscal quarters of a calendar year for certain smaller sized TASE listed companies which
report under TASE only listed reporting requirements. We believe that, were we reporting under the TASE only listed reporting
requirements (and not the Dual Listed Reporting Requirements), we would qualify for such dispensation based on our company size
as set forth in the regulation. In addition the SEC has recently announced that it is seeking comment for the dispensation of
the requirement for the announcement of financial results for each of the first and third fiscal quarters for certain U.S. domestic
issuers. Thus it remains uncertain as to how companies dual-listed on both the Tel Aviv Stock Exchange and a domestic U.S. securities
exchange, and report in accordance with the in accordance with the Dual-Listed Reporting Requirements, will continue their practices
with respect to the announcements of financial information for each of the first and third fiscal quarters, and it is possible
that we may adopt practices for the announcement (if any) of financial information for each of the first and third fiscal quarters
which are different than what we have provided in the past.



The
depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying ADSs if a holder of our ADSs
does not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect their interests.



Under
the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying ADSs
at shareholders’ meetings if a holder of our ADSs does not vote, unless:



| | ● | we
    have instructed the depositary that we do not wish a discretionary proxy to be given;                             
| | - | -------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                          
| | ● | we
    have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or
| |   |                                                                                                                          
| | ● | a
    matter to be voted on at the meeting would have a material adverse impact on shareholders.                         



The
effect of this discretionary proxy is that a holder of our ADSs cannot prevent our ordinary shares underlying such ADSs from being
voted, absent the situations described above, and it may make it more difficult for shareholders to influence the management of
our company. Holders of our ordinary shares listed for trading on the TASE are not subject to this discretionary proxy.





35






We
currently do not anticipate paying cash dividends, and accordingly, shareholders must rely on the appreciation in our ADSs for
any return on their investment.



We
currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not
anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our ADSs
will depend upon any future appreciation in their value. There is no guarantee that our ADSs will appreciate in value or even
maintain the price at which our holders have purchased their ADSs.



The
ability of any Israeli company to pay dividends or repurchase its shares is subject to Israeli law, and the amount of cash dividends
payable may be subject to devaluation in the Israeli currency.



The
ability of an Israeli company to pay dividends or repurchase its shares is governed by Israeli law, which provides that distributions,
including cash dividends and share repurchases, may be made only out of retained earnings as determined for statutory purposes.
Since we do not have earnings, we currently do not have any ability to pay dividends or repurchase our shares.



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



The
depositary for the ADSs has agreed to pay investors in our ADSs 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. Investors
in our ADSs will receive these distributions in proportion to the number of ordinary shares their 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 of 1933, as amended or 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 which was distributed in foreign currency 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 affect 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 investors in our ADSs may not receive the same distributions or dividends
as those we make to the holders of our ordinary shares, and, in some limited circumstances, investors in our ADSs may not receive
any value for such distributions or dividends if it is illegal or impractical for us to make them available to investors in our
ADSs. These restrictions may cause a material decline in the value of the ADSs.



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



Holders
of our ADSs do not have the same rights as 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 our ADSs may not receive sufficient
notice of the 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 our 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 our 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 the ordinary shares underlying 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 our ADSs may not be able to exercise their right to vote and
they may lack recourse if the ordinary shares underlying their ADSs are not voted as they requested. In addition, ADS holders
will not be able to call a shareholders’ meeting unless they first withdraw their ordinary shares from the ADS program and
convert them into the underlying ordinary shares held in the Israeli market in order to allow them to submit to us a request to
call a meeting with respect to any specific matter, in accordance with the applicable provisions of the Companies Law and our
amended and restated articles of association.





36






Our
ordinary shares and our ADSs and Series A warrants are traded on different markets and this may result in price variations.



Our
ordinary shares trade on the TASE, and our ADSs and Series A warrants trade on The NASDAQ Capital Market. Trading on these markets
take place in different currencies (U.S. dollars on NASDAQ and New Israeli Shekels, or NIS, on the TASE), and at different times
(resulting from different time zones, different trading days and different public holidays in the U.S. and Israel). The trading
prices of our securities on these two markets may differ due to these and other factors. Any decrease in the price of our securities
on one of these markets could cause a decrease in the trading price of our securities on the other market.



Our
ADSs and Series A warrants have little prior trading history in the U.S., and present level of market activity may not be sustained,
which may limit the ability of our investors to sell our ADSs in the U.S.



Although
our ADSs and Series A warrants have been traded on The NASDAQ Capital Market since November 20, 2015, the present level of market
activity for our ADSs and Series A warrants may not be sustained. If an active market for our ADSs and Series A warrants is not
sustained, it may be difficult for an investor to sell its ADSs, Series A warrants or the ADSs underlying the warrants being issued
in this offering.



We
can issue non-voting senior preferred shares without shareholder approval, which could adversely affect the rights of holders
of ordinary shares.



Our
amended and restated articles of association permit us to establish the rights, privileges, preferences and restrictions of future
series of our non-voting senior preferred shares, which contain superior liquidation and dividend rights, and may contain other
rights, including conversion, redemption, optional and other special rights, qualifications, limitations or restrictions, equivalent
or superior to our ordinary shares and to issue such non-voting senior preferred shares without further approval from our shareholders.
The rights of holders of our ordinary shares may suffer as a result of the rights granted to holders of non-voting senior preferred
shares that we may issue in the future. In addition, we could issue non-voting senior preferred shares containing rights that
prevent a change in control or merger, thereby depriving holders of our ordinary shares of an opportunity to sell their shares
at a price in excess of the prevailing market price.



If
equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade
our ADSs or Series A warrants, the price of our ADSs or Series A warrants could decline.



The
trading market for our ADSs and Series A warrants will rely in part on the research and reports that equity research analysts
publish about us and our business. The price of our ADSs or Series A warrants could decline if such research or reports are not
published or if one or more securities analysts downgrade our ADSs or Series A warrants or if those analysts issue other unfavorable
commentary or cease publishing reports about us or our business.





37






We
have broad discretion as to the use of the net proceeds from our November 2015 initial public offering in the U.S., and from our
July 2016 follow-on public offering in the U.S., and may not use them effectively.



We
currently intend to use the net proceeds from our November 2015 initial public offering on NASDAQ and our July 2016 follow-on
public offering to expand our clinical development program, specifically with respect to our Phase III clinical trial for our
leading therapeutic candidate, KIT-302, finance the CMC activities required for submitting a New Drug Application to the FDA,
perform the final PK (pharmacokinetic) trial for the selected formulation of KIT-302, finance our business development activities
to enable out-licensing of our leading therapeutic candidate, KIT-302, expand our clinical development pipeline for additional
drug products; and for general corporate purposes, including working capital requirements. For more information, see “Item
14 Material Modifications to the Rights of Security Holders and Use of Proceeds – E. Use of Proceeds.” In addition,
we intend to continue to use the net proceeds of our July 2016 follow-on public offering to fund the possible acquisition of new
therapeutic candidates and for general working capital purposes. We currently have no binding agreements or commitments to complete
any transaction for the possible acquisition of new therapeutic candidates. There is no certainty that we will be able to complete
any transactions for the possible acquisition of new therapeutic candidates. However, our management will have broad discretion
in the application of the net proceeds from the public offerings. Our shareholders may not agree with the manner in which our
management chooses to allocate the net proceeds from the public offerings. The failure by our management to apply these funds
effectively could have a material adverse effect on our business, financial condition and results of operation. Pending their
use, we may invest the net proceeds from the public offerings in a manner that does not produce income.



We
are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may
make our ordinary shares less attractive to investors.



We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from
various requirements that are applicable to other public companies that are not “emerging growth companies.” Most
of such requirements relate to disclosures that we would only be required to make if we also ceased to be a foreign private issuer
in the future, for example, the requirement to hold shareholder advisory votes on executive and severance compensation and executive
compensation disclosure requirements for U.S. companies. However, as a foreign private issuer, we would still be required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We are exempt from such requirement for as
long as we remain an emerging growth company, which may be up to five fiscal years after the date of this offering. We will remain
an emerging growth company until the earliest of: (a) the last day of our fiscal year during which we have total annual gross
revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the closing of our initial
U.S. offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible
debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. When we are
no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed
above. We cannot predict if investors will find our ordinary shares, ADSs, or warrants less attractive as a result of our reliance
on exemptions under the JOBS Act. If some investors find our ordinary shares, ADS, or warrants less attractive as a result, there
may be a less active trading market for our ordinary shares, ADS, and warrants and our share price may be more volatile.



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



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



Kitov
Parent was incorporated under the laws of the State of Israel (under a previous name) on August 12, 1968 and its ordinary shares
were originally listed for trading on the TASE in 1978. Our ordinary shares are currently traded on the TASE under the symbol
“KTOV”, and our ADSs and our public warrants are traded on NASDAQ under the symbols “KTOV” and “KTOVW”,
respectively.



In
October 2012, the District Court in Lod, Israel approved the creditors arrangement in accordance with Section 350 of the Companies
Law in order to effectuate the sale by Kitov Parent (then known as Mainrom Line Logistics Ltd.) of all its activities, assets,
rights, obligations and liabilities to a private company held by its then controlling shareholders, and all rights of Kitov Parent’s
creditors against it were extinguished. The sale was made pursuant to an arrangement between Kitov Parent and its creditors. Following
such sale and a related cash distribution to Kitov Parent’s shareholders, Kitov Parent remained without any assets, debt
and/or liabilities. As described in the District Court approval, in connection with the sale, on October 31, 2012, the former
controlling shareholders sold control of Kitov Parent (then a shell company) to Mr. Sheer Roichman. From the completion of these
transactions until the completion of the acquisition of Kitov Pharmaceuticals described below, Kitov Parent did not conduct any
business activities and was a public shell company listed on the TASE with no assets, debt and/or liabilities.





38






Kitov
Parent has a wholly owned Israeli subsidiary, Kitov Pharmaceuticals Ltd., which, together with Kitov Parent, is engaged in the
research and development of KIT-302. Kitov Pharmaceuticals Ltd. was founded in June 2010, and pursuant to an Asset Purchase Agreement,
dated October 13, 2010, between Kitov Pharmaceuticals and JPW PCH LLC, or JPW, JPW sold to Kitov Pharmaceuticals JPW’s rights
and interests in and to U.S. and international patent applications relating to KIT-301 and KIT-302. Kitov Pharmaceuticals assumed
all liabilities arising from ownership, use or exercise, of rights under, the patent applications.



On
July 11, 2013, Kitov Parent acquired Kitov Pharmaceuticals Ltd. As part of the acquisition, Mainrom Line Logistics Ltd. changed
its name to Kitov Pharmaceuticals Holdings Ltd. For more information regarding this transaction, see “Item 7. Major Shareholders
and Related Party Transactions – B. Related Party Transactions – Share Transfer Agreement with Kitov Pharmaceuticals”.



On
November 25, 2015, Kitov Parent completed an initial public offering on NASDAQ of ADSs and public warrants to purchase ADSs. The
gross proceeds to us from this offering were approximately $13 million, prior to deducting underwriting discounts, commissions
and other offering expenses.



On
January 13, 2017, we announced that we had acquired a majority equity stake in TyrNovo Ltd., a privately held developer of novel
small molecules in the oncology therapeutic field. For more information see, “Item 4. Information on the Company –
History and Development of the Company – Recent Developments - Acquisition of TyrNovo” below.



On
April 25, 2017, the boards of directors of each of Kitov Parent and Kitov Pharmaceuticals approved a merger between the two entities,
with Kitov Parent remaining as the surviving entity. For more information on the proposed merger, see Item 4.C – Organizational
Structure.



We
had no material capital expenditures for the years ended December 31, 2016, 2015, and 2014.



Recent
Developments



Issuance
of Patent by USPTO



On
May 12, 2016, we announced that our patent application to approve a patent relating to a drug for treating hypertension received
a notice of allowance for ameliorating the elevation of blood pressure caused by a specific NSAID by the co-administration of
a specific calcium channel blocker. It is possible to pursue claims to additional inventions based on the patent application by
making patent filings prior to issuance of a patent on this patent application, and we have proceeded accordingly. On August 10,
2016, we announced that the United States Patent and Trademark Office (USPTO) issued patent #9,408,837 covering KIT-302. The patent,
entitled “Ameliorating Drug-Induced Elevations In Blood Pressure By Adjunctive Use Of Antihypertensive Drugs,” was
issued on August 9, 2016 and will have a term that can extend to February 28, 2030. We are pursuing additional claims to inventions
described in U.S. Patent #9,408,837. On February 1, 2017, we announced that the USPTO issued a Notice of Allowance to us related
to claims expanding the patent coverage for our lead drug candidate, KIT-302, to include oral dosage compositions containing both
amlodipine and celecoxib.



July
2016 Follow-on Public Offering



On
July 5, 2016, we completed a follow-on public offering of 2,378,823 Class A units and 1,150,589 Class B units, with each Class
A unit consisting of one ADS and a public warrant and each Class B unit consisting of a non-listed, pre-funded warrant to purchase
one ADS, or a pre-funded warrant, and a public warrant. Each Class A unit was sold at a negotiated price of $3.40 per unit, including
the ADS issuance fee of $0.01 per ADS, and each Class B unit was sold at a negotiated price of $3.40 per unit, including the pre-funded
warrant exercise price of $0.01 per full ADS and the ADS issuance fee of $0.01 per ADS. The pre-funded warrants were exercisable
at any time after the date of issuance upon payment of the exercise price and the ADS issuance fee, and all of these pre-funded
warrants have been exercised to-date. The gross proceeds to us from this offering were approximately $12,000,000, prior to deducting
placement agent fees and other estimated offering expenses.





39






Renal
Function Clinical Trial



Additional
data from the Phase III clinical trial of KIT-302 suggest beneficial effects on renal (kidney) function, as compared to negative
effects on renal function caused by other NSAIDS. For more information, see, “Item 4. Business Overview - Our Therapeutic
Candidates – Research and Development”.



In
addition, we have commenced conducting a clinical trial designed to validate and better quantify these potential beneficial renal
effects. Any information obtained from this clinical trial is not intended to be a part of the information to be included in our
new drug application that we expect to submit for the marketing clearance by the FDA of KIT-302 in Q2 2017. The trial analysis
may further explain the synergistic antihypertensive effect, where the reduction in blood pressure demonstrated with KIT-302 was
greater than that observed with amlodipine alone. Accordingly, we are conducting a double blind, placebo controlled, clinical
trial intended statistically to demonstrate KIT-302’s effects on renal and vascular function, while providing us with data
with respect to KIT-302 in addition to the data of the Phase III clinical trial, by utilizing a primary efficacy end-point in
the renal function clinical trial comparable to that of the Phase III clinical trial. The trial is being performed in the U.K.
in three groups of 15 to 45 patients (and a total of 105 patients), with each patient treated over a total period of two weeks.
Group One is receiving a placebo, Group Two is being treated with a standard drug available in the market for treating hypertension
(amlodipine besylate, one of the components of KIT-302), and Group Three is being treated with the two components of KIT-302 (celecoxib
and amlodipine besylate). We expect to complete recruitment of the patients for this trial during the second calendar quarter
of 2017.



The
renal function clinical trial for KIT-302 is being conducted in medical centers in the United Kingdom on the basis of the approval
of the British Regulatory Authority (MHRA), as well as the approvals of the relevant U.K. ethics committees, which we have already
received.



Acquisition
of TyrNovo



On
January 13, 2017, we announced that Kitov Parent acquired a majority equity stake in TyrNovo Ltd., a privately held developer
of novel small molecules in the oncology therapeutic field, for consideration of $2 million in cash and $1.8 million equivalent
of Kitov Parent’s ordinary shares based on the closing price of Kitov Parent’s shares on the TASE on January 11, 2017,
or 11,292,508 ordinary shares. We may acquire additional shares in TyrNovo from all or part of TyrNovo’s additional minority
shareholders for consideration consisting of Kitov Parent’s ordinary shares in such amounts as to be agreed with the shareholders.



TyrNovo
has developed NT219, a small molecule that we believe presents a new concept in cancer therapy by affecting two key oncology-related
mechanisms, Insulin Receptor Substrates (IRS) 1 and 2, as well as the signal transducer and activator of transcription 3 (STAT3).
In pre-clinical trials, NT219, in combination with several approved cancer drugs, displayed potent anti-tumor effects in various
cancers by preventing the tumors from developing resistance to the approved drug treatments and re-sensitizing tumors to the approved
drugs even after resistance is acquired. For more information regarding NT219, see, “Item 4. Business Overview - Our Therapeutic
Candidates – NT219”.



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



We
are a development stage biopharmaceutical company currently focused on the development of:



| | (i) | KIT-302,
                                         a combination drug for the simultaneous treatment of two clinical conditions: pain caused
                                         by osteoarthritis and hypertension (high blood pressure), which can be pre-existing or
                                         caused by the treatment for osteoarthritis; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | NT219,
                                         a small molecule that uniquely targets two pathways highly involved in cancer drug resistance.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------





40






In
the past, we had an additional combination drug in our pipeline, KIT-301, for which we had an active IND. Kitov Parent’s
board of directors, following the recommendation of its science & technology committee recently determined not to continue
the further development of KIT-301. In the board’s view, KIT-301 can be categorized as an inferior earlier generation combination
drug, as compared to KIT-302, and taking into account the progress we have made with KIT-302’s development and in preparing
our anticipated NDA, to be submitted to the FDA, for KIT-302, the board determined to remove KIT-301 from our development pipeline,
and has directed management to update the FDA about such discontinuation of development of KIT-301.



In
addition, we may consider the acquisition of therapeutic candidates at various stages of development in various therapeutic areas
or currently approved drug products. We currently have no binding agreements or commitments to complete any transaction for the
possible acquisition of new therapeutic candidates or approved drug products. There is no certainty that we will be able to complete
any additional transactions for the possible acquisition of new therapeutic candidates or approved drug products. We may not be
able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully. In this regard,
acquisitions involve numerous risks, including difficulties in the integration of the acquired therapeutic candidates and the
diversion of management’s attention from other business concerns. Although we will endeavor to evaluate the risks inherent
in any particular transaction, there can be no assurance that we will properly ascertain all such risks. In addition, acquisitions
could result in the incurrence of substantial additional indebtedness and other expenses or in potentially dilutive issuances
of equity securities. There can be no assurance that difficulties encountered with acquisitions will not have a material adverse
effect on our business, financial condition and results of operations.



We
intend to seek FDA approval for the commercialization of our therapeutic candidates, and where applicable through the Section
505(b)(2) regulatory path under the Federal Food, Drug, and Cosmetic Act of 1938, as amended. Where applicable, we also intend
to seek corresponding regulatory paths for approval in other foreign jurisdictions. Our current pipeline consists of two therapeutic
candidates: (i) KIT-302, which has recently successfully completed its Phase III clinical trial and which will be subject to review
and approval by the FDA, upon filing a completed 505(b)(2) NDA and (ii) NT219, which is in a preclinical stage but will likely
be subject to review and approval by the FDA upon filing a completed 505(b)(1) NDA, if at all. Upon and subject to receipt of
the requisite approvals, we intend to commercialize our therapeutic candidates through licensing and other commercialization arrangements
with pharmaceutical companies on a global and/or territorial basis. We may also evaluate, on a case by case basis, co-development
and similar arrangements, as well as independent commercialization of our therapeutic candidates.



Background
on KIT-302 and NT219



KIT-302
is based on the generic drugs celecoxib and amlodipine besylate. Celecoxib, the active ingredient in the branded drug Celebrex®,
is a known and approved-for-use drug designed primarily to relieve pain caused by osteoarthritis. Amlodipine besylate is a known
and approved-for-use drug designed to reduce blood pressure. This combination is designed to simultaneously relieve pain caused
by osteoarthritis and treat hypertension, which is one of the side effects of using non-steroidal anti-inflammatory drugs, or
NSAIDs, for treating pain caused by osteoarthritis.



In
January 2017, we acquired a majority of the shares in TyrNovo, a privately held Israeli developer of novel small molecules in
the oncology therapeutic field. TyrNovo has developed NT219, a small molecule that presents what we believe to be a new concept
in cancer therapy by affecting two key oncology-related mechanisms, Insulin Receptor Substrates (IRS) 1 and 2, as well as the
signal transducer and activator of transcription 3 (STAT3). In in-vivo pre-clinical trials in PDX models, NT219, administered
concomitantly with several approved oncology drugs, displayed potent anti-tumor effects in various cancers by preventing the tumors
from developing resistance to the approved drug treatments and re-sensitizing tumors to the approved drugs even after resistance
is acquired. For more information regarding NT219, see, “Item 4. Business Overview - Our Therapeutic Candidates – NT219”.





41






Our
competitive strengths



The
pharmaceutical market is characterized by large international pharmaceutical companies that develop a wide range of products,
both generic and NCEs, which operate alongside smaller companies, such as ours, that develop a specific drug or a combination
of drugs. Therefore, many small companies enter into agreements with such global companies during the drug development stage in
order to continue the development or marketing of the drug, taking advantage of the financial, marketing and/or other resources
available to such global companies. At the same time, the global companies tend to enter into agreements with smaller companies
in order to save development time and resources. The global drug sector is a highly developed market with a turnover of hundreds
of billions of U.S. dollars and intense competition. Most of the drugs we intend to develop have or are expected to have competing
drugs or other therapies, developed at the same time by other companies and organizations. We are therefore exposed to competition
in our field of operation. Although we believe our therapeutic candidates have advantages which our competitors’ products
lack, there is a constant risk in the drug development field that a competing party will complete the development stages before
we are able to develop our therapeutic candidates intended for the same disease. Moreover, a constant threat in our market is
presented by new drugs that have already completed all the development stages and have already entered the market and are competing
with the treatments and drugs previously available on the market.



We
believe there are several advantages to the therapeutic candidates we are developing, such as:



For
KIT-302:



| | ● | providing
    a solution to the concerns of physicians who avoid prescribing an NSAID treatment for pain caused by osteoarthritis due to
    its cardiovascular side effects;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | reassuring
    physicians who are concerned that their patients who are treated for osteoarthritis will also be treated for hypertension,
    which is a known side effect of NSAID treatments for pain caused by osteoarthritis. This is a particular concern, as hypertension
    is usually not accompanied by tangible symptoms, and therefore patients may not be aware of their condition or the need to
    treat it;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | using
    one drug that also includes an active ingredient that treats hypertension either as an existing condition or as a side effect
    of using other drugs, ensures that the patient receives the suitable treatment for their disease and for its side effect;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | purchasing
    one drug as opposed to purchasing two separate drugs may lead to financial savings for patients in the U.S. by requiring payment
    of just one co-payment and prescription fee as opposed to a double co-payment and prescription fee. In addition, the use of
    one combination drug reduces the patient’s discretion with respect to whether to purchase and use only one of the drugs
    and provides a comprehensive dual medical treatment in one combined drug; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ● | using
    calcium channel blockers in our therapeutic candidates as an antihypertensive. Calcium channel blockers are not included in
    the FDA Safety Information Release for NSAIDs co-administered with angiotensin converting enzyme inhibitors, or ACE inhibitors,
    or with angiotensin II receptor antagonists.                                                                                                                                                                   



In
addition to the aforementioned medical and economic advantages of KIT-302, we believe that KIT-302 has several commercial advantages,
such as reduced development time compared to the development time of new chemical entities (NCEs) and decreased risk factors in
the development process. These commercial advantages derive from the fact that combination drugs are based on known materials
already approved for use by the FDA. The FDA offers a shortened regulatory procedure referred to as a “505(b)(2) NDA”
to approve combination drugs. This procedure may be used to file a request to approve a product that relies on the results of
the safety and effectiveness trials performed for the components of the combination in the past by others and not by the submitters
of the request for approval. Accordingly, the approval process in a 505(b)(2) NDA is shorter and less expensive compared to the
approval process for NCEs. In addition, the use of known, proven and safe components recognized by physicians and medical organizations,
and the enhanced medical effect of concurrently treating and preventing hypertension, may shorten the time and decrease the costs
usually required for the acceptance of the new product in the drug marketplace.





42






For
NT219:



NT219 is a small molecule,
and small molecules typically are less expensive to develop and have less onerous CMC as compared to large proteins or antibodies.
In addition, NT219 has the potentially advantageous effect of:





| | ● | overcoming
    drug resistance acquired by cancer; and             
| | - | -------------------------------------------------------------------
| |   |                                                                    
| | ● | working
    in combination with multiple approved cancer therapies.



Our
strategy



Our
goal is to become a significant player in the development of innovative chemical drugs with a clinical and commercial added value.



Key
elements of our strategy are to:



| | ● | develop
    our therapeutic candidates with clinical and commercial advantages and obtain approval thereof from the FDA and other foreign
    regulatory authorities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | expand
    our line of therapeutic candidates through the acquisition or in-licensing of technologies, products and drugs intended to
    meet clinical needs, thereby utilizing the skills, knowledge and experience of our personnel to develop and enhance the value
    of additional products, and bring them to market efficiently;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | capitalize
    on the FDA’s 505(b)(2) regulatory pathway, or other pathways that simplify the road to an NDA submission, to obtain
    more timely and efficient approval of our formulations of previously approved products, when applicable;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | cooperate
    with third parties to both develop and commercialize therapeutic candidates in order to share costs and leverage the expertise
    of others; and                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                    
| | ● | enter
    into sub-license agreements with international companies for potential or future therapeutic candidates based on potential
    upfront and milestone payments, royalties and/or other marketing arrangements, depending on product and market conditions.



Our
current therapeutic candidate, “KIT-302,” and our newly-acquired therapeutic candidate, “NT219”, are described
below.



KIT-302:



Background
on Osteoarthritis and Hypertension



Numerous
factors influence the drug market, including the aging of the general population. As life expectancy increases, we expect that
demand will increase for innovative drugs that treat diseases related to the elderly, such as osteoarthritis and hypertension.



Osteoarthritis



Arthritis
means joint inflammation. The term is used to describe the pain, stiffness and/or swelling in the joints of the body where one
or more bones are joined by ligaments. A normal joint provides a smooth surface enabling adjacent bones to move and glide on each
other during normal motion. In contrast, an arthritic joint is one that may have varying degrees of inflammation and possibly
destruction of the joint cartilage. These destructive changes preclude normal motion and cause pain.





43






The
most common type of arthritis is called osteoarthritis and is more common with advancing age. People with osteoarthritis usually
have joint pain and a decreased range of joint movement. Unlike some other forms of arthritis, osteoarthritis affects only the
joints. This condition is also sometimes called degenerative joint disease. Osteoarthritis primarily affects the joint cartilage.
Healthy cartilage allows bones to glide over one another and absorbs energy from the shock of physical movement. However, with
osteoarthritis, the surface layer of cartilage breaks down and wears away. This allows the bony surface of the different bones
under the cartilage to rub together, causing, pain, swelling, and loss of motion of the joint. Over time, affected joints may
lose their normal shape. Also, bone spurs, small growths called osteophytes, may grow on the edges of the joint further impairing
joint function. Thus, bits of bone or cartilage can break off and float inside the joint space, causing more pain and possible
damage.



Osteoarthritis
in the younger population is usually caused by traumatic injuries to the joints. In contrast, in the older population it is a
more of a chronic degenerative disease process. The main symptom of osteoarthritis is pain that appears gradually, worsens with
exertion, and is transiently relieved by rest.



The
pain caused by osteoarthritis is described by patients as a deep pain or a burning sensation related to the joint tissues of the
affected area. Osteoarthritis mainly affects the cartilage and disrupts the structural balance in the cartilage of the joint,
causing the cartilage cells to increase production of new raw materials required to create cartilage, but concurrently produce
enzymes that digest the cartilage.



Osteoarthritis
is one of the most common diseases worldwide causing physical disabilities in adults. According to data published in the Center
for Disease Control (CDC) website, an estimated 26.9 million U.S. adults in 2005 were diagnosed with osteoarthritis, of which
approximately 50% suffer from hypertension. Among individuals in the U.S., it is estimated that over 40% will eventually suffer
from osteoarthritis in at least one joint.



The
pharmaceuticals used for treating osteoarthritis include a range of drugs. The particular choice of treatment is made according
to the disease severity. These can range from acetaminophen for cases of milder severity, to diclofenac, naproxen, and celecoxib
for moderate severity, up to treatment with narcotics for the most severe cases.



Various
non pharmacological treatments are intended to relieve the pain caused by the disease and to preserve and improve joint function.
Among these treatments are changes in the patient’s life style, namely diet, physiotherapy and exercise. The objectives of these
treatments are to strengthen the muscles adjacent to the joints and increase their ranges, thereby reducing body weight, and decreasing
the loads on the weight carrying joints to subsequently reduce the intensity of the pain.



In
some cases, the conservative non pharmacological treatments are not sufficiently helpful. In such cases, patients typically request
medical treatment. According to data published on the website of the Mayo Clinic in April 2013, the most common medical treatments
are the use of analgesics, such as NSAIDs, which include enzyme inhibitors, such as COX-2. NSAIDs treat inflammation by inhibiting
enzymes responsible for the initiation of the development of inflammation and subsequent pain. COX-2 enzyme inhibitors are non-steroidal
drugs that treat inflammation by directly inhibiting COX-2, an enzyme responsible for the development of inflammation and subsequent
pain but do not target the COX-1 enzyme. Targeting selectivity for COX-2 reduces the risk of peptic ulceration, and is the main
advantage of celecoxib, rofecoxib and other members of this drug class over non COX-2 selective NSAIDs.



After
several COX-2 inhibiting drugs were approved for marketing, data from clinical trials revealed that COX-2 inhibitors caused a
significant increase in heart attacks and strokes, with some drugs in the class possibly having worse risks than others. See “Business
- Our Therapeutic Candidates – Competitive Treatments for Pain Caused by Osteoarthritis”.



A
typical osteoarthritis treatment plan with these analgesics is as follows: (i) initial treatment of minor osteoarthritis will
begin with use of drugs such as acetaminophen; (ii) in the event that acetaminophen treatment is not effective, the physician
will proceed to treatments using NSAIDs, which will begin using drugs such as Ibuprofen followed by naproxen and/or other NSAIDs
(more than 20 types of drugs, including COX-2 enzyme inhibitors); (iii) in cases where treatment with these drugs is ineffective,
the treatment will be direct injection of steroids into the affected joint; (iv) in cases where steroid injection is ineffective,
treatment by injecting hyaluronic acid (HA) into the affected joint will be considered; and (v) in the event that all the aforementioned
treatments fail, the patient may consider surgical replacement of the affected joint.





44






As
noted above, NSAIDs, both over-the-counter and prescription are commonly taken to manage the pain of backache, osteoarthritis,
rheumatoid arthritis, headache and other painful conditions. For example, according to a study commissioned by Kitov from IMS
Health, the largest vendor of U.S. physician prescribing data, between April 2015 and March 2016 there were 2,428,176 prescriptions
for celecoxib dispensed in the US.



NICOX,
a pharmaceutical company, has attempted to develop NAPROXCINOD ®, a naproxen-based drug intended to treat pain
and to act as an anti-hypertensive. From 2005 to 2010, NICOX completed three Phase III clinical trials following a significant
investment. However, the results of the trials did not meet the FDA’s requirements. Therefore, in May 2010, an outside advisory
committee to the FDA recommended against approving the drug. As a result of this recommendation, and its own internal review,
the FDA rejected the request for NDA approval. According to an announcement by NICOX in April 2012, pursuant to an appeal filed
by NICOX in July 2011, a meeting was held in April 2012 between representatives of NICOX and the FDA, in which NICOX was informed
that in order to gain approval of its drug, it must file a new NDA, that would include results from additional clinical trials,
for the purpose of approving a specific dosage of the drug.



On
July 9, 2015 the FDA published a safety announcement requiring labels for prescription NSAIDs to indicate that the risk of heart
attack or stroke can occur as early as the first weeks of using an NSAID and that the risk may increase with longer use of the
NSAID. In effect, the current labeling, in effect since 2005, will be strengthened as a result of a review by the FDA of a variety
of new safety information on prescription and over-the-counter NSAIDs, including observational studies, a large combined analysis
of clinical trials, and other scientific publications. These studies were discussed at a joint meeting of the Arthritis Advisory
Committee and Drug Safety and Risk Management Advisory Committee held in February 2014.



Hypertension
(High Blood Pressure)



Hypertension
is the most common chronic disease in the western world, affecting approximately thirty percent (30%) of the U.S. adult population,
according to an article in Morbidity and Mortality Weekly Report. Untreated, hypertension can cause significant morbidity and
mortality.



According
to its physiological definition, “hypertension” is an excessive pressure applied by the blood on the walls of the blood
vessels. The term hypertension refers to excessive arterial blood pressure, which is the pressure in the arteries that propels
blood to body organs.



The
blood pressure is created as a result of the contraction of the cardiac muscle propelling blood into the arteries, which possess
a limited capacity to store the blood. Blood pressure is measured in units of mercury (Hg) millimeters (mm Hg). Diagnosing hypertension
in adults requires at least two measures on two different occasions. There are two blood pressure values:



| | ● | Systolic
    pressure is the peak pressure in the arteries measured in the cardiac cycle, during the contraction of the heart’s left
    ventricle (systole); and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Diastolic
    pressure is the lowest pressure point in the arteries measured when the heart’s left ventricle is relaxing and there
    is no contraction of the heart (diastole).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
the past, hypertension was generally defined as a systolic blood pressure of greater than 140 mm Hg or a diastolic blood pressure
of greater than 90 mm Hg. However, as discussed below, a recently halted NIH study may result in these designated values being
set lower.



The
cause of hypertension in 95% of patients is unknown, and in these cases hypertension is defined as “essential hypertension”.
However, some studies postulate that genetic factors and environmental factors are involved in the initial development of hypertension.
These factors include high salt consumption, obesity, excessive alcohol consumption, and probably mental and behavioral factors,
which may be caused by various circumstances, including working in certain professions. Extreme hypertension may lead to functional
disorders, and worsening health, while the affected person does not necessarily feel it and/or is aware of it. Therefore, hypertension
is often referred to as the “silent killer”.





45






The
danger of hypertension is continuing damage to blood vessels in critical areas of the body, such as blood vessels in the heart,
kidneys, eyes, and to the nerve tissue in the brain where any damage may cause a stroke. Moreover, damage to the blood vessels
may cause blockage due to arteriosclerosis and lead to the tearing of the vessels. These complications may cause various diseases
and even death.



Hypertension
treatment methods focus on reducing the patient’s blood pressure to normal values, thereby preventing the occurrence of
complications in the long term. Even a small increase in blood pressure may cause significant cardiovascular problems. For example,
it has been shown that any increase in blood pressure above a systolic value of 115 mm Hg is associated with an increased risk
of suffering a cardiovascular death. This finding has been repeatedly replicated and it is now established that there is no safe
level of blood pressure increase above of the “normotensive baseline value” of approximately 120 systolic and 70 diastolic.
The documentation of a danger of any increase in blood pressure above a value of 120/70 was recently documented in September of
2015 in a large NIH sponsored clinical trial which enrolled over 9000 patients age 50 and older. This study also documented that
patients age 50 and older with systolic blood pressures greater than 120 had a greater rate of adverse cardiovascular events than
did those whose systolic blood pressure was treated to levels below 120.



It
has been recognized for many decades that hypertension requires treatment. This fact has been recently re-emphasized by a paper
that reviewed 147 prior randomized studies of antihypertensive treatments. This meta-analysis study, concluded that the majority
of the adult population with hypertension can be expected to benefit considerably from using anti-hypertension drugs.



Hypertension
can be treated with many different classes of medications. These include diuretics, beta blockers, alpha blockers, calcium channel
blockers, ACE inhibitors, angiotensin receptor antagonists and vasodilators. In general, these medications work by either relaxing
blood vessels and thereby lowering the pressure in arteries, or by assisting the body in removing fluid and thereby decreasing
the pressure inside of arteries.



Although
drugs from each of the various classes of antihypertension medications are able to reduce blood pressure, there are marked differences
in their side effects profiles. For example, the diuretics can result in kidney problems, while the beta blockers can slow the
heart rate. It is therefore important for physicians carefully to select which antihypertension medications to prescribe for patients
based upon the patient’s other medical problems, including what concomitant medications they are receiving.



Blood
pressure can undergo significant alterations when subjects are placed on various medications. For example, according to a May
2010 FDA Joint Meeting of the Arthritis Advisory Committee and the Drug Safety and Risk Management Advisory Committee report published
by the FDA, an increase of about 3.5 mm Hg was diagnosed following the use of naproxen, while the use of Celebrex causes an increase
of about 2.5 mm Hg. In addition, in August 2011 the FDA issued a Safety Information release stating that co-administration of
NSAIDs, including selective COX-2 inhibitors, with ACE inhibitors or with angiotensin II receptor antagonists, may result in deterioration
of renal function, including possible acute renal failure, and that the antihypertensive effect of ACE inhibitors may be attenuated
by NSAIDs. No such Safety Information release was issued with regard to calcium channel blockers, which is the anti-hypertensive
used in our therapeutic candidates.



Background
on Combination Products



Numerous
companies worldwide have developed in recent years successful combination products comprised of a combination of two or more drugs
to treat various medical conditions, where the safety and effectiveness of each of the drugs was proven separately.



Combination
products manufactured and sold, which are similar to our therapeutic candidate, include:



| | ● | Vimovo®,
    which was developed by Pozen Inc. and was approved by the FDA in May 2010. Vimovo® is a combination of naproxen
    and esomeprazole magnesium, marketed by AstraZeneca PLC worldwide (except in the U.S.) and by Horizon Pharma in the U.S.,
    and is designed for treating both pain and preventing gastric ulcer. Vimovo’s® net sales in the U.S.
    reached $121 million in 2016, compared to net sales of $163 million in 2014.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





46






| | ● | Caduet®,
    a combination of Lipitor® and amlodipine, was originally developed and manufactured by Pfizer and is designated
    for treating both cholesterol and hypertension, with global sales of $193 million in 2015.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Janumet®,
    a combination of metformin and sitagliptin, manufactured by Merck & Co. Inc. and designated to treat diabetes, with sales
    of $2,201 million in 2016.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Combination
drugs may provide improved medical treatment of patients diagnosed as suffering from two or more different diseases and also may
provide convenience to patients by using a single drug instead of multiple drugs. In addition, combination drugs have significant
commercial advantages deriving from maintaining and even increasing the market share of the active ingredients after their patents
expire by extending the life span of the patents for the active ingredients through the use of combination drugs.





Our Therapeutic Candidate







Studies
estimate that approximately 13.5 million patients in the U.S. alone may suffer concurrently from hypertension and chronic osteoarthritis
pain in the joints, according to data published by the CDC. We are developing KIT-302 based on the generic drugs celecoxib and
amlodipine besylate. Celecoxib is the active ingredient in the branded drug “Celebrex®”, a known and
approved-for-use drug designed primarily to relieve pain caused by osteoarthritis. Our combination is designed simultaneously
to relieve pain caused by osteoarthritis and treat hypertension, which is one of the side effects of using NSAIDs for treating
pain caused by osteoarthritis. Our strategy in developing KIT-302 is based on our belief that the added anti-hypertensive drug
will decrease the side effect of increased hypertension typically caused by the use of NSAIDs alone.



To
date, no combination drug exists that offers the combined treatment of pain caused by osteoarthritis and hypertension. We therefore
believe that KIT-302 potentially holds significant advantages over the currently available drugs in the market, due to the fact
that the drug treatment of osteoarthritis together with hypertension eases the burden of the treatment process for patients by
providing the ability to use one drug instead of multiple drugs concurrently, thereby increasing the patients’ ease of compliance
with the required treatment.



KIT-302
is a fixed dosage combination product based on two known active ingredients (celecoxib and amlodipine besylate), the effectiveness
and safety of which has been separately proven for each, and which is intended to enable the concurrent treatment of pain caused
by osteoarthritis and hypertension.



On
November 7, 2013, we filed with the FDA the final statistical plan for the Phase III clinical trial protocol for KIT-302 as part
of the SPA procedures. On February 20, 2014, the FDA replied and indicated that the proposed data analysis of the trial’s
results that we submitted to the FDA provides a suitable solution to achieve the primary endpoint of the Phase III clinical trial
and to support the final request for approval, which will be submitted. As a result of the SPA process, the FDA approved the Phase
III trial design for our clinical trial, and cleared our clinical trial to begin, and on June 18, 2014, we commenced the clinical
trial, as described below under “Research and Development”. The Phase III clinical trial was performed using the Adaptive
Trial Design method, or ATD, in accordance with the SPA. Based on the ATD format, in the first stage of the trial 150 patients
were to be recruited. Then, the decision as to whether or not to add additional patients was to be based upon a statistical calculation
of the preliminary data performed by an independent statistician appointed by the Company in accordance with the protocol of the
clinical trial, and in accordance with the FDA’s requested and approved method as part of the SPA, as agreed upon between
the FDA and the Company. Statistical analysis of the preliminary data collected in the Phase III clinical trial was performed
by the independent statisticians in accordance with the clinical trial protocol, and showed that the study met the pre-specified
criteria the FDA required for stopping patient enrollment and thus proceeding to the completion of the final statistical analyses.
The final statistical analyses of the data demonstrated that the Phase III study of KIT-302 met its FDA approved primary efficacy
endpoint with statistical significance based upon the efficacy endpoint of less than 0.001.





47






Below
is a summary of our projected timeline for the development of KIT-302:



|Current
    Status                                                                                                                                                                                                |  | 2017                                                                                                                                      |  | 2018                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------
|FDA
                                         Approved SPA.
        Phase
        III clinical trial completed.
        CMC,
        including stability testing, completed.
        PK
        studies completed. |  | Submission
                                         of NDA to the FDA.
        Continuation
        of our business development activity. |  | Anticipated
    FDA approval for marketing



KIT-302
is based on two generic drugs (amlodipine besylate and celecoxib). Until December 2015 celecoxib was protected by patents held
by Pfizer Inc. (Celebrex®). The USPTO granted Pfizer a “reissue patent” covering methods of treating
osteoarthritis and other approved conditions with celecoxib, the active ingredient in Celebrex®. The reissued patent
extended U.S. patent protection for Celebrex® from May 30, 2014 to Dec. 2, 2015.



We
currently expect to receive approval from the FDA to market KIT-302 in 2018. As a result of this timing and because KIT-302 combines
the treatment of osteoarthritis by celecoxib with amlodipine besylate, which treats the side effect of hypertension, we believe
that KIT-302 may be an attractive alternative to the newly marketed generic versions of Celebrex®.



Research
and Development – KIT 302



KIT-302
is a fixed dose combination drug comprised of known and approved-for-use components, the combination of which is intended simultaneously
to treat the pain caused by osteoarthritis and reduce blood pressure, thereby offsetting a side effect caused by the use of NSAIDs
for osteoarthritis. Following discussions with the FDA, the FDA approved a development design in accordance with the 505(b)(2)
NDA track. The FDA did not require us to perform pre-clinical trials in animal models, and therefore we are required only to conduct
a single Phase III clinical trial and standard pharmacokinetic trials and bioequivalence trials.



For
the development of KIT-302, we performed a double blind, placebo controlled, Phase III clinical trial for testing the decrease
of hypertension in patients receiving our KIT-302 therapeutic candidate. This trial was performed in the U.K. in four groups of
twenty-six (26) to forty-nine (49) patients (a total of 152 patients), with each patient treated over a total period of two weeks.
Group One was treated with the two components of KIT-302 (celecoxib and amlodipine besylate), Group Two was treated with a standard
drug available in the market for treating hypertension (amlodipine besylate, one of the components of KIT-302), Group Three was
treated with celecoxib only, and Group Four received a double placebo. The trial began in June 2014, and the final patient completed
the study in November 2015.



The
purpose of the trial was to show that a combination of the two components of KIT-302, as demonstrated in Group One, lowered blood
pressure by at least 50% as compared to the reduction in blood pressure in patients in Group Two (treatment with amlodipine besylate
only). We were not required by FDA to demonstrate or measure efficacy in treatment of pain caused by osteoarthritis. Group Three
and Group Four were included for control purposes and would not be considered in evaluating the primary efficacy endpoint. The
trial was conducted with off-the-shelf drugs, while the combination drug was being developed in parallel by Dexcel Ltd., or Dexcel.
The trial was conducted with only one dosage of amlodipine besylate (10 mg), although based on the SPA signed with the FDA, we
expect that conducting a trial with this dosage only will be sufficient to seek marketing approval from the FDA for three dosages
(10mg, 5 mg, and 2.5 mg), each combined with 200 mg of celecoxib. We announced the top line trial results in December 2015, showing
that we successfully met the primary efficacy endpoint of the trial protocol as approved by the FDA. Data from the trial further
revealed that KIT-302 tended to reduce blood pressure more than the widely used hypertension drug amlodipine besylate alone.



The
trial’s interim results demonstrated that the number of 152 patients treated was adequate to provide statistical validity
and therefore, the results were final. These final results showed that in patients treated with amlodipine besylate only, there
was a mean reduction in daytime systolic blood pressure of 8.8 mm Hg. In patients treated with KIT-302’s two components,
there was a mean reduction in daytime systolic blood pressure of 10.6 mm Hg. Therefore, the primary efficacy endpoint of the study
has been successfully achieved with a p value of 0.001.





48






Additional
data from the trial results showed that favorable blood pressure effects of KIT-302’s two components were present in all
blood pressure variables measured in the study. The data indicated that the blood pressure reduction synergy seen with combining
celecoxib and amlodipine, is seen not only in the study’s primary efficacy endpoint of daytime systolic blood pressure,
but was also seen from daytime diastolic blood pressure measurements and in all other blood pressure variables. After two weeks
of treatment, the reduction with daytime diastolic blood pressure measurements with amlodipine alone was 5.5 mm Hg, while for
patients treated with KIT-302’s components the reduction was 7.6 mm Hg. For nighttime systolic blood pressure after two weeks
of treatment, the reduction with amlodipine therapy alone was 6.3 mm Hg, while for patients treated with KIT-302’s components
the reduction was 10.7 mm Hg. For nighttime diastolic blood pressure after two weeks of treatment, the reduction with amlodipine
besylate alone was 3.1 mm Hg, while for patients treated with KIT-302’s components the reduction was 7.2 mm Hg. Thus, the synergy
in blood pressure reduction demonstrated with KIT-302’s two components was present at all times of day and with both blood
pressure measures. Although celecoxib when combined with amlodipine appears to have a synergistic effect in lowering blood pressure,
it appears to have the opposite effect when administered by itself. While not conclusive, we believe the medical community may
take great interest in this study’s findings and its implications for pain management and hypertension.



On
May 12, 2016, we announced that we received the minutes from the FDA for the pre-NDA submission meeting held during April 2016.
The FDA requested that the clinical study results be reviewed to check and make sure no patients suffered adverse consequences
from the enhanced blood pressure reduction resulting from the synergy of celecoxib and amlodipine. We were unable to identify
of any such events occurring and intend to include a detailed review in the safety section of our NDA. In addition, to further
establish safety, the FDA requested a literature search related to animal studies of celecoxib and amlodipine be included in the
NDA. The FDA also requested documentation of a clinical need for KIT-302, such as by identifying how many patients receive celecoxib
on a chronic basis. We will provide this documentation by using computerized patient care databases. Finally, the FDA requested
that the statistical calculation for the primary efficacy endpoint be performed using an alternate mathematical technique. Our
statistician has already conducted this calculation and determined that the primary efficacy endpoint was successfully met with
the new calculation method.



The
final and complete analyses, including the clinical study report, will be completed during the second quarter of 2017. We plan
to file our NDA for marketing approval of KIT-302 with the FDA in Q2 2017.



In
addition, in connection with our Development Services Agreement with Dexcel, pursuant to which Dexcel developed the formulation
for KIT-302 and is performing the subsequent stability testing and manufacturing scale-up in quantities adequate for submission
of an NDA to the FDA, Dexcel performed a pilot clinical bioequivalence trial, or the Pilot PK Study, and subsequently performed
final conclusive pharmacokinetic (PK) bioequivalence (BE) studies, or the Final PK Studies. The objective of these studies was
to check the pharmacokinetics of the combination drug in order to show that the blood levels achieved with our combination are
equivalent to those obtained with the individual components. The Pilot PK Study was performed during April and May 2015, after
completion of the formulation of two prototypes of KIT-302; during June 2015, we obtained the successful results of the Pilot
PK Study.



The
Final PK Studies, conducted under both fed and fasted conditions, using the 10 mg amlodipine component were performed between
March and April 2016, and on May 10, 2016 we announced that we, together with Dexcel, had successfully completed the Final PK
Studies. The Final PK Studies compared the PK of KIT-302 which is a fixed dose combination consisting of celecoxib (200 mg), indicated
for osteoarthritis pain, and amlodipine (10 mg), indicated for high blood pressure, to off-the-shelf branded 200 mg celecoxib
capsules and 10 mg amlodipine tablets. The results demonstrated that for both the Cmax (the maximum blood level achieved) and
Area Under the Curve (the area under the concentration-time curve for drug levels), the 90% confidence intervals for both the
amlodipine and celecoxib components of KIT-302 were documented to be between 80% and 125% of the values obtained with the off-the-shelf
drugs, thus meeting the FDA’s standard for establishing bioequivalence. A similar PK bioequivalence study for KIT-302, containing
a lower dosage (2.5 mg) of amlodipine, was completed during the third quarter of 2016, and showed similar bioequivalence results
to those found in the Final PK Study. See “Item 4. Information on the Company – B. Business Overview – Development
Services Agreement with Dexcel” below for more information.





49






On
June 28, 2016, we announced that Dexcel had successfully completed an initial stability study for KIT-302. On December 7, 2016,
we announced that Dexcel completed a study of nine pivotal batches of KIT-302 demonstrating stability for six months, which is
required to submit our NDA to the FDA.



The
Phase III clinical trial for KIT-302 was conducted in medical centers in the United Kingdom on the basis of approvals received
from the British Regulatory Authority (MHRA) and the U.K. ethics committees. It is not currently known whether the European regulatory
authorities will require additional studies in order to grant their approval to market KIT-302 in Europe.



Additional
data from the Phase III clinical trial of KIT-302 also suggest beneficial effects on renal (kidney) function, as compared to negative
effects on renal function caused by other NSAIDS. Greater reduction in plasma levels of creatinine was observed in patients in
the KIT-302’s two components arm (-3.22 umol/L) compared to creatinine reduction observed in patients in the amlodipine
arm (-2.55 umol/L), suggesting better renal function. In addition, peripheral edema, a known side effect of calcium channel blockers
such as amlodipine, was reported in 15.6% of patients receiving amlodipine alone, but in only 8.2% of patients receiving KIT-302’s
two components, suggesting that KIT-302 may protect against the amlodipine side effect of causing fluid retention by the kidneys.
It is recognized that such an effect could explain at least in part, the synergistic blood pressure reducing effect of KIT-302
over therapy with amlodipine alone.



Although
not intended as part of the information to be included in our new drug application that we expect to submit in Q2 2017 for the
marketing clearance by the FDA of KIT-302, we have commenced conducting a clinical trial designed to validate and better quantify
these potential beneficial renal effects. The trial analyses may further explain the synergistic antihypertensive effect, where
the reduction in blood pressure demonstrated with KIT-302’s two components was greater than that observed with amlodipine
alone. Accordingly, we are conducting a double blind, placebo controlled, clinical trial intended statistically to demonstrate
KIT-302’s effects on renal and vascular function, while providing us with data with respect to KIT-302 in addition to the
data of the Phase III clinical trial, by utilizing a primary efficacy end-point in the renal function clinical trial comparable
to that of the Phase III clinical trial. The trial is being performed in the U.K. in three groups of 15 to 45 patients (and a
total of 105 patients), with each patient treated over a total period of two weeks. Group One is receiving a placebo, Group Two
is being treated with a standard drug available in the market for treating hypertension (amlodipine besylate, one of the components
of KIT-302), and Group Three is being treated with the two components of KIT-302 (celecoxib and amlodipine besylate). We expect
to complete recruitment of the patients during the second calendar quarter of 2017 and to receive the interim results of the trial
approximately up to eight weeks after completion of patient treatment.



The
renal function clinical trial for KIT-302 is being conducted in medical centers in the United Kingdom on the basis of the approval
of the British Regulatory Authority (MHRA), as well as the approvals of the relevant U.K. ethics committees, which we have already
received.



On
September 7, 2016, we entered into an additional Work Order with Java Clinical Research Ltd., or Java, a contract research organization
based in Dublin, Ireland, under our Master Research Services Agreement with Java, the term of which was extended by such Work
Order. Pursuant to the Work Order Java will manage the renal function clinical trial for KIT-302, including preparation and filing
of the requests to the ethics boards and the necessary regulatory bodies of the U.K., recruiting the trial participants, employment
of the primary researchers, identification and evaluation of the medical centers and their subsequent management throughout the
trial period and overall management of the trial process through its completion. We also have directly engaged with third party
medical centers for the performance of our renal function clinical trial being managed by Java. The Master Research Services Agreement
will remain in effect until Java has provided all services through the completion of our renal function clinical trial. The parties
have customary termination rights and either party may terminate the Master Research Services Agreement (or any work thereunder)
upon 60 days’ notice. In addition, on July 26, 2016, we entered into a new services agreement with DABL Limited, or DABL,
an Irish company based in Dublin, Ireland, in the ambulatory blood pressure monitoring technologies field, in connection with
the renal function clinical trial. According to the agreement, DABL will provide protocol consultation services and coordinate
the ambulatory blood pressure monitoring (ABPM) procedures and the analysis of the blood pressure tests during and after our renal
function clinical trial. The services agreement will remain in effect until DABL has provided all services provided for in the
agreement. However, we may terminate the agreement at any time upon 90 days’ notice, and both parties have customary termination
rights. We estimate that the total cost of the agreement with Java, as well the cost of all other service providers with respect
to the renal function clinical trial, will amount to approximately $1.8 million, assuming completion of the clinical trial as
anticipated.





50






In
order to market or sell our KIT-302 therapeutic candidate in Europe, we must apply to an applicable European country’s regulatory
authorities with a request to approve KIT-302 according to the Mutual Recognition Procedure (MRP), which is a procedure applied
by European Directive No. 2001/83/EC that enables access to medicinal products (drugs) in 27 countries of the European Union.
The MRP approval process requires the applicant to receive approval in one of the EU countries and then apply for recognition
of the other member countries to acknowledge the approval within their territory. It is not currently known whether the European
regulatory authorities will require additional studies in order to grant their approval to market KIT-302 in Europe.



The
Company has engaged an external consultant to assist the Company in applying for regulatory approval of KIT-302 in Europe. As
part of this process, the Company is scheduled to meet with regulatory authorities in Sweden and the UK in the second quarter
of 2017. At that meeting, the applicability of the Company’s current data for obtaining marketing authorization in various
EU countries will be discussed. Following this meeting, a plan will be finalized for obtaining regulatory approval for marketing
in EU countries.



Competitive
Treatments for Pain Caused by Osteoarthritis



The
competition for KIT-302 is expected to come from the oral anti-arthritic market, or more specifically the traditional non-selective
NSAIDs (such as naproxen and diclofenac), traditional NSAID/gastroprotective agent combination products or combination product
packages (such as Vimovo®, Arthrotec®, Prevacid® and NapraPACTM) and the most
common COX-2 inhibitor in the U.S. market, Celebrex® (including generic versions of Celebrex®).
In 2016, global sales of branded celecoxib (Celebrex® by Pfizer, and Celecox® by Astellas) were
$733 million and $423 million, respectively, out of which $116 million were in the US (by Pfizer) and $423 million in Japan (by
Astellas).



Due
to the voluntary withdrawal of Vioxx® by Merck & Co. in September 2004, the FDA ordered the withdrawal of Bextra®by Pfizer and issued a Public Health Advisory in April 2005, requiring manufacturers of all prescription products containing
NSAIDs to provide warnings regarding potential adverse cardiovascular events as well as life-threatening gastrointestinal events
associated with the use of NSAIDs. Moreover, subsequent to an FDA advisory committee meeting in February 2005 that addressed the
safety of NSAIDs, and, in particular, the cardiovascular risks of COX-2 selective NSAIDs, the FDA has indicated that long-term
studies evaluating cardiovascular risk will be required to approve new NSAID products that may be used on an intermittent or chronic
basis. We believe that KIT-302 has a competitive advantage over other drugs in the market because, as a COX-2 inhibitor, it has
limited gastrointestinal side effects, and due to the addition of amlodipine besylate it is designed to address existing hypertension
and the cardiovascular side effects of NSAIDs.



License
Agreement for Territory of South Korea



On
March 8, 2017, we announced that the Company signed a definitive License Agreement KIT-302, for the territory of South Korea,
with Kuhnil Pharmaceutical Co., Ltd. (“Kuhnil”). Upon receipt of marketing authorization in South Korea, Kuhnil will
have the exclusive right and license to manufacture, distribute and sell KIT-302 in South Korea. Kuhnil will be responsible for
seeking regulatory approval for KIT-302 in South Korea. Under the terms of the license agreement, Kitov is entitled to receive
milestone payments upon achievement of certain predefined regulatory milestones, as well as double digit royalties in a range
between ten and twenty percent of net sales. The initial term of the definitive agreement with Kuhnil is for ten years from the
date of first commercial sale and shall automatically renew for an additional one-year term. Commercial launch in South Korea
is estimated to take place in 2019.



In
addition to our internal business development team, we have engaged consultants which are assisting us with finding other potential
collaboration partners for KIT-302 in various markets world-wide.





51






NT219



In
January 2017, we acquired a majority of the shares in TyrNovo which is developing the NT219 therapeutic candidate. NT219 is a
small molecule that presents what we believe is a new concept in cancer therapy by promoting the degradation of two oncology-related
checkpoints, Insulin Receptor Substrates (IRS) 1 and 2 as well as the inhibition of signal transducer and activator of transcription
3 (STAT3). In pre-clinical trials, NT219, in combination with several approved cancer drugs, displayed potent anti-tumor effects
and increased survival in various cancers by preventing the tumors from developing drug resistance and restoring sensitivity to
the drugs after resistance is acquired.The NT219 technology has been tested in a number Patient-Derived Xenograft (PDX)
models where human primary cancer cells or biopsies are taken and transplanted into mice and then used to test various cancer
drugs.



Below is a summary of our current projected timeline for the development of NT219:



|Current
    Status                                                                                                                                                                                                             |  | 2017                                                                                                                                                                                                           |  | 2018                                                                                                                                                                                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Efficacy
                                         demonstrated in
 various PDX models. Additional experiments ongoing.
        Academic
        collaborations established.
        CMC
        and toxicology work initiated. |  | Complete
                                         CMC for
        preclinical
        studies.
        Begin
        required preclinical toxicology studies.
        Conduct
        preIND meeting with FDA. |  | Complete
                                         cGMP manufacturing of drug for clinical trials.
        Complete
        preclinical studies.
        Submit
        IND.
        Initiate
        clinical trials.



Background
on Cancer Drug Resistance





The following
paragraphs are high-level summaries of the therapeutic areas we are currently investigating for NT219:





Solid
malignancies (e.g., pancreatic, colon and non-small cell lung cancer). According to the Journal of Oncology Practice, in 2020
roughly 1 in every 19 people worldwide will either be diagnosed with a solid tumor or be a cancer survivor. According to the American
Cancer Society, lung cancers are the most common cause of cancer deaths worldwide, while pancreatic cancers are the third most
common cause of cancer-related deaths in the United States. Pancreatic, colon and non-small cell lung malignancies have high mortality
rates and poor five-year survival prognosis. Novel, emerging therapeutic approaches for targeting solid tumors are being developed
and tested.



Tumor
Resistance to Cancer Therapies. Resistance to chemotherapy and to targeted therapies is a major problem facing current cancer
research. The mechanisms of resistance to ‘classical’ cytotoxic chemotherapeutics and to therapies that are designed to be selective
for specific target proteins share many features, such as alterations in the drug target, activation of pro-survival pathways
and ineffective induction of cell death.



Recent
evidence suggests that among other mechanisms of resistance, inhibition of central oncological target kinases such as EGFR, MEK
and mutated-BRAF could trigger feedback activation of STAT3 and IRS-to-PI3K/AKT, major survival pathways that bypass (prevent)
the anti-cancer effects of various drugs.



IRS.
Insulin Receptor Substrate (IRS) is a junction protein that mediates various mitogenic and anti-apoptotic signals mainly from
Insulin-like Growth Factor-1 Receptor (IGF1R) and Insulin Receptor (IR), but also from other oncogenes such as v-Src and ALK-fusion
proteins. IRS expression is often increased in human tumors, such as prostate, pancreatic, liver, renal and ovarian cancer. Resistance
to several anti-cancer therapies (e.g. inhibitors of EGFR, MEK, mutated-BRAF, mTOR, as well as chemotherapy) may be mediated by
IRS up-regulation, as demonstrated in peer reviewed research articles which have been published in scientific journals.



STAT3.Signal transducer and activator of transcription 3 (STAT3) plays crucial roles in several cellular processes such as cell
proliferation and survival, and has been found to be aberrantly activated in many cancers. Much research has explored the leading
mechanisms for regulating the STAT3 pathway and its role in promoting tumorigenesis. Evidence suggests that feedback activation
of STAT3 plays a prominent role in mediating drug resistance to a broad spectrum of targeted cancer therapies and chemotherapies.





52






Mechanism
of Action – NT219



The
NT219 therapeutic candidate is a small molecule that we believe presents a new concept in cancer therapy by promoting the degradation
of two oncology-related checkpoints, IRS1 and IRS2 as well as the inhibition of STAT3. While targeted anti-cancer drugs inhibit
the “ON” signal, NT219 activates the “OFF” switch, extensively blocking major oncogenic pathways.



Elimination
of IRS proteins and blockage of STAT3 by NT219 could potentially prevent resistance to multiple anti-cancer drugs, extend the
duration of effective drug treatment, and restore drug sensitivity in resistant tumors.



IRS
down-regulation can be mediated by several oncogenic pathways (MAPK, mTOR, EGFR etc). Blockade of these pathways by various drugs,
could inhibit serine phosphorylation of IRS, leading to the activation of IRS to AKT survival bypass. Therefore, elimination of
IRS1/2 by NT219 potentially could prevent resistance and prolong the tumor’s response to various targeted drugs, as depicted
below:







There
have been reports in peer reviewed academic literature describing the involvement of Insulin-like Growth Factor-1 Receptor (IGF1R)
up-regulation in drug-resistance. In these cases blockage of IGF1R direct substrates, IRS1/2, by NT219 could potentially overcome
drug resistance.



The
same principal is true for STAT3. Feedback activation of STAT3 is a common cause of resistance to many targeted cancer therapies
(such as the inhibitors of EGFR, MEK, HER2) and chemotherapies. Combining these cancer therapies with NT219, which disrupt this
feedback mechanism, could potentially enhance cell death and delay resistance, suggesting a co-treatment strategy that may be
broadly effective in oncogene-addicted tumors.



Preclinical
results - NT219



In
pre-clinical trials, NT219, in combination with several approved cancer drugs, displayed potent anti-tumor effects and increased
survival in various cancers by preventing the tumors from developing drug resistance and restoring sensitivity to the drugs after
resistance is acquired.The NT219 molecule has been tested in a number Patient-Derived Xenograft (PDX) models where human
primary cancer cells or biopsies are taken and transplanted into mice and then used to test various cancer drugs. NT219 has shown
efficacy in various PDX models originated from non-small cell lung cancer (NSCLC), sarcoma, melanoma, pancreatic, head & neck
and colon cancers.





53








Efficacy of NT219 was demonstrated in combination
with three major families of oncology drugs:





| | 1) | Antibodies
                                         such as the anti-epidermal growth factor receptor (EGFR) antibody (Erbitux®);
| | -- | ---------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                  

| | 2) | Kinase
                                         Inhibitors such as blockers of EGFR (Tagrisso®, Tarceva®),
                                         MEK (Mekinist®), Mutated BRAF (Zelboraf®), and mTOR inhibitors
                                         such as Afinitor®; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                   

| | 3) | Chemotherapy
                                         agents such as Gemzar®, 5FU, and Oxaliplatin.
| | -- | ---------------------------------------------------------------------------------------------------



Below
are two examples of results obtained with NT219 in PDX models. In the head and neck cancer model treatment with NT219 in combination
with Elrotinib (trade name Tarceva®, an anti EGFR drug approved for various oncology indications; left panel) resulted
in overcoming drug resistance and lower volume of the tumor, compared to the treatment arm with Erlotinib alone. Similar results
are depicted on the right panel where NT219 was tested in a pancreatic cancer PDX model where combination of NT219 with gemcitabine
(a chemotherapy agent approved for pancreatic cancer) resulted in decreased tumor volume compared to those obtained with gemcitabine
alone.







The
above are examples only, and do not serve as indication of the nature of the cancers that we expect NT219 to be tested on, or
to eventually assist in treating. Prior to the commencement of a Phase 1 study and following a pre-IND to be conducted with the
FDA, we will narrow the scope of which concomitant cancer drug or drugs NT219 will be combined in our prospective clinical trials.



Competitive
Oncology Drugs in Development that Target IRS1/2 or STAT3



While
we are not familiar with other molecules which act as dual inhibitors of both IRS1/2 and STAT3, or lead to degradation of IRS1/2,
and which are in late stage of development, there are several therapeutic candidates in development which target either upstream
target of IRS1/2 as Insulin Like Growth Factor 1 Receptor (IGF1R), such as Dalotuzumab (a recombinant humanized monoclonal antibody,
developed by Merck & Co for metastatic breast cancer), or target STAT3 such as Napabucasin (which is developed by Boston Biomedical
and designed to inhibit cancer stem cell pathways), which are currently at Phase III clinical trial state for metastatic pancreatic
and colon cancers. There are also other therapeutic candidates that target these pathways, which are mostly in early stage of
development.



Since we have not yet selected
any final clinical indication, and no target drug has been chosen to be administrated in combination with NT219, we are at this
preliminary stage unable to determine the future competitive landscape of this therapeutic candidate.







54






Intellectual
Property



Patents,
trademarks and licenses and market exclusivity



Our
policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related
to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely
on our trade secrets, know-how and continuing technological innovation to develop and maintain our proprietary position. We vigorously
defend our intellectual property to preserve our rights and gain the benefit of our technological investments. Our business is
not dependent, however, upon any single patent, trademark or contract. See “Item 3. Key Information – D. Risk Factors
– Risks Related to Intellectual Property”.



Kitov



Kitov
owns two U.S. patents and we expect to be pursuing additional international patent applications relating to our lead drug candidate,
KIT-302. The following is a brief description of Kitov’s patent and trademark-related intellectual property:



On
August 10, 2016, we announced that the United States Patent and Trademark Office (USPTO) issued patent #9,408,837 covering KIT-302.
The patent, entitled “Ameliorating Drug-Induced Elevations In Blood Pressure By Adjunctive Use Of Antihypertensive Drugs,”
was issued on August 9, 2016 and is expected to have a term that can extend to February 28, 2030. The patent includes claims covering
methods of ameliorating celecoxib-induced elevation of blood pressure by administering celecoxib and amlodipine separately or
in combination.



On
February 1, 2017, we announced that the USPTO issued a Notice of Allowance to Kitov related to claims expanding the patent coverage
for our lead drug candidate, KIT-302, to include oral dosage compositions containing both amlodipine and celecoxib. This patent
is a divisional of the ’837 patent and is expected to have a similar patent term as that of patent #9,408,837.



We
anticipate that in the near future, we will be filing an international patent application, in partnership with Dexcel Ltd., which
is related to pharmaceutical formulations of celecoxib and amlodipine and methods of preparing the same.



We
have applied to the USPTO for registered trademarks for two possible trade names for KIT-302 and have also submitted these names
to the FDA for approval.



TyrNovo



TyrNovo’s
patent and patent application portfolio includes five patent families, covering compounds that modulate protein kinase signaling
and their use in treatment of protein kinase related disorders, including cancer and neurodegenerative disorders.



| | ● | Patent
                                         Family 1 was filed on December 4, 2007 (PCT filing date). The priority date is December
                                         4, 2006. This family is directed to compounds modulating the insulin like growth factor
                                         receptor signaling and methods of using these compounds as chemotherapeutic agents for
                                         the treatment of protein kinase related disorders, in particular cancer. National phase
                                         counterparts exist in Europe (EP 2125712) and the United States (US 8,058,309), both
                                         of which are now granted with a maximum term of December 4, 2027 (not including any available
                                         patent term extension (PTE)). The European patent was validated in France, Germany, Switzerland
                                         and the United Kingdom.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | ● | Patent
                                         Family 2 was filed on June 7, 2009 (PCT filing date). The priority date is June 5,
                                         2008. This family is also directed to compounds modulating the insulin like growth factor
                                         receptor signaling, and methods of using these compounds as chemotherapeutic agents for
                                         the treatment of protein kinase related disorders, in particular cancer. This patent
                                         family specifically discloses and claims NT-219. National phase counterparts exist in
                                         Europe (EP 2285774), the United States (US 8,637,575) and Israel (IL 209638), all of
                                         which are now granted with a maximum term of June 7, 2029 (not including any available
                                         PTE). The European patent was validated in France, Germany, Italy, Netherlands, Spain,
                                         Switzerland, and the United Kingdom.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





55






| | ● | Patent
                                         Family 3 was filed on December 27, 2011 (PCT filing date). The priority date is December
                                         27, 2010. This family is directed to compounds having a benzo[e][1,3]thiazin-7-one core,
                                         and methods of using these compounds as chemotherapeutic agents for the treatment of
                                         protein kinase related disorders, in particular cancer. National phase counterparts exist
                                         in Europe (EP 2658847) and the United States (US 9,073,880), both of which are now granted
                                         with a maximum term of December 27, 2031 (not including any available PTE). The European
                                         patent was validated in France, Germany, Italy, Netherlands, Spain, Switzerland, and
                                         the United Kingdom.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | ● | Patent
                                         Family 4 was filed on July 13, 2014 (PCT filing date). The priority date is July
                                         14, 2013. This family is directed to use of the compounds disclosed in Patent Families
                                         1-3, for the treatment of neurodegenerative diseases, including Alzheimer’s disease.
                                         National phase applications were filed in Europe (EP 3021944), the United States (US2016/0158243)
                                         and Israel (IL 243566). All of these applications are now pending. Any patent issuing
                                         from these applications will have a maximum patent term of July 13, 2034.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

| | ● | Patent
                                         Family 5 was filed on February 4, 2016 (PCT filing date). The earliest priority date
                                         is February 5, 2015. This family is directed to combinations of the compounds disclosed
                                         in Patent Families 1-3, acting as dual modulators of Insulin Receptor Substrate (IRS)
                                         and signal transducer and activator of transcription 3 (STAT3), with various targeted
                                         drug families (inhibitors of Epidermal Growth Factor Receptor (EGFR), mammalian target
                                         of rapamycin (mTOR); mitogen-activated protein kinase (MEK) or mutated B-Raf), as well
                                         as chemotherapeutic agents (Gemcitabine, 5-FU, Irinotecan and Oxaliplatin), and use of
                                         such combinations for the treatment of cancer. The combinations can be used to treat
                                         tumors that have developed resistance to these anti-cancer drugs, to prevent acquired
                                         resistance of a tumor to these drugs, or to prevent tumor recurrence following cease
                                         of treatment with these drugs. The present invention further relates to the treatment
                                         of cancer using combination therapy comprising a dual modulator of IRS and STAT3, in
                                         combination with an immunotherapy agent, and can be used to sensitize a tumor to immunotherapy.
                                         The deadline to enter the national phase is August 5, 2017.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Exclusive
License Agreement with Yissum.



On
August 15, 2013, TyrNovo entered into a license agreement with Yissum, which was subsequently amended on April 8, 2014 and March
16, 2017, pursuant to which Yissum has granted TyrNovo an exclusive, license (with the right to sublicense) for the development,
use, manufacturing and commercialization of products using certain patents and know-how owned by Yissum and patent applications
filed by Yissum in connection with unique inhibitors of the IGF-1R Pathway (the “Yissum License Agreement”).



Under
the terms of the Yissum License Agreement, Yissum shall retain the ownership of the Licensed Technology (as such term is defined
therein). All rights in the results of the activities carried out by TyrNovo or third parties in the development of these products
(and certain results obtained under material transfer agreements signed by TyrNovo and Yissum (the “TyrNovo MTAs”))
shall be solely owned by TyrNovo (unless an employee of the Hebrew University of Jerusalem or each of its branches is an inventor
of any of the patents claiming such results, in which case they shall be owned jointly by Yissum and TyrNovo). TyrNovo has the
right to grant sub-licenses to third parties in accordance with the terms set forth in the Yissum License Agreement.



TyrNovo
has agreed to compensate Yissum for past patent expenses in a certain amount by no later than December 31, 2018. Yissum controls
the prosecution, maintenance and enforcement of all the licensed patent rights. TyrNovo has the first right but not the obligation
to take action against an infringement of a licensed patent right, if TyrNovo does not do so, Yissum may undertake such action
at its own expense.



TyrNovo
has agreed to pay Yissum a percentage of “net sales” as royalties and to pay Yissum a percentage of the income that
it receives from granting sub-licenses to third parties. Additionally, in the event of an M&A prior to an IPO, TyrNovo will
be required to pay Yissum a percentage of the proceeds received under such M&A. In the event of an IPO, then prior to the
closing of such IPO. TyrNovo shall issue to Yissum such number of ordinary shares equal to a certain percentage of all TyrNovo
shares.





56






TyrNovo
is required to indemnify Yissum, the Hebrew University of Jerusalem, their directors, employees, their executive officers, consultants
or representatives and any other persons acting on their behalf under the license against any liability, including product liability,
damages, losses, expenses, fees and reasonable legal expenses arising out of the TyrNovo’s actions or omissions or which derive
from its use, development, manufacture, marketing, sale or sublicensing of any licensed product, licensed technology, and certain
information obtained under the TyrNovo MTAs, or exercise of the Yissum License Agreement, and the TyrNovo MTAs.



TyrNovo
has agreed to maintain, and to add Yissum as an additional insured party with respect to, clinical trials, comprehensive general
liability and product liability insurance as well as an insurance policy with respect to the foregoing indemnification prior to
the time when it commences clinical trials and concludes its first commercial sale.



The
term of the Yissum License Agreement shall expire upon the later of (i) the date of expiration in such country of the last to
expire licensed patent included in the licensed technology; or (ii) the end of a period of 15 year of the first commercial sale
in such country, while the license granted under the Yissum License Agreement will terminate upon the later of (unless the license
has been earlier terminated or expired) (i) the date of expiration in such country of the last to expire licensed patent included
in the licensed technology; (ii) the date of expiration of any exclusivity on the product granted by a regulatory or government
body in such country; or (iii) the end of a period of 15 year of the first commercial sale in such country.



TyrNovo
has the right to terminate the Yissum License Agreement upon a prior written notice. Either party has the right to terminate the
Yissum License Agreement if the other party is in material breach and has not cured such material breach within a certain amount
of days as of the receipt of a written notice notifying it of such breach. Additionally, Yissum has the right to terminate the
Yissum License Agreement immediately in the event that TyrNovo does not comply with its obligation (following a certain amount
of months cure period) to use commercially reasonable efforts to develop and commercialize the products; if an attachment is made
over the majority of TyrNovo’s assets or if execution proceedings are taken against TyrNovo and are not set aside within a certain
amount of days; or if TyrNovo challenges in any forum the validity of one or more of the licensed patents. Upon termination of
the Yissum License Agreement, TyrNovo shall assign to Yissum all the results obtained during the development of the product. If
Yissum licenses to third parties such results, then TyrNovo shall be entitled to a percentage of the net proceeds actually received
by Yissum from such third parties, up to an amount covering TyrNovo’s expenses incurred during the development of such assigned
results.



Market
exclusivity



In
the branded pharmaceutical industry, the majority of a branded drug’s commercial value is usually realized during the period
in which the product has market exclusivity. In the U.S. and some other countries, when market exclusivity expires and generic
versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s
sales. The rate of this decline varies by country and by therapeutic category, and the number of generic competitor entrants to
the market, among other factors; however, following patent expiration, branded products often continue to have market viability
based upon the goodwill of the product name, which typically benefits from trademark protection.



A
brand product’s market exclusivity is generally determined by two forms of intellectual property: patent rights held by
the brand company and any regulatory forms of exclusivity to which the NDA-holder is entitled.



Patents
are a key determinant of market exclusivity for most branded pharmaceuticals. Patents provide the brand company with the right
to exclude others from practicing an invention related to the medicine. Patents may cover, among other things, the active ingredient(s),
various uses of a drug product, pharmaceutical formulations, drug delivery mechanisms and processes for (or intermediates useful
in) the manufacture of products, and polymorphs. Protection for individual products extends for varying periods in accordance
with the expiration dates of patents in the various countries. The protection afforded, which may also vary from country to country,
depends upon the type of patent, its scope of coverage and the availability of meaningful legal remedies in the country.





57






Market
exclusivity is also sometimes influenced by regulatory exclusivity rights. Many developed countries provide certain non-patent
incentives for the development of medicines. For example, the U.S., the European Union and Japan each provide for a minimum period
of time after the approval of a new drug during which the regulatory agency may not rely upon the data of the original party who
developed the drug to approve a competitor’s generic copy. Regulatory exclusivity rights are also available in certain markets
as incentives for research on new indications, on orphan drugs and on medicines useful in treating pediatric patients. Regulatory
exclusivity rights are independent of any patent rights and can be particularly important when a drug lacks broad patent protection.
Most regulatory forms of exclusivity, however, do not prevent a competitor from gaining regulatory approval prior to the expiration
of regulatory data exclusivity on the basis of the competitor’s own safety and efficacy data on its drug, even when that
drug is identical to that marketed by the innovator.



It
is not possible to predict the length of market exclusivity for any of our branded products with certainty because of the complex
interaction between patent and regulatory forms of exclusivity, and inherent uncertainties concerning patent litigation. There
can be no assurance that a particular product will enjoy market exclusivity for the full period of time that we currently estimate
or that the exclusivity will be limited to the estimate.



Government
Regulations and Funding



Pharmaceutical
companies are subject to extensive regulation by foreign, federal, state and local agencies, such as the FDA in the U.S., the
Ministry of Health in Israel, or the various European regulatory authorities. The manufacture, distribution, marketing and sale
of pharmaceutical products are subject to government regulation in the U.S. and various foreign countries. Additionally, in the
U.S., we must follow rules and regulations established by the FDA requiring the presentation of data indicating that our products
are safe and efficacious and are manufactured in accordance with current good manufacturing practices cGMP regulations. If we
do not comply with applicable requirements, we may be fined, the government may refuse to approve our marketing applications or
allow us to manufacture or market our products, and we may be criminally prosecuted. We and our manufacturers and clinical research
organizations may also be subject to regulations under other foreign, federal, state and local laws, including, but not limited
to, the U.S. Occupational Safety and Health Act, the Resource Conservation and Recovery Act, the Clean Air Act and import, export
and customs regulations as well as the laws and regulations of other countries. As a result, pharmaceutical companies must ensure
their compliance with the Foreign Corrupt Practices Act and federal healthcare fraud and abuse laws, including the False Claims
Act.



These
regulatory requirements impact our operations and differ from one country to another, so that securing the applicable regulatory
approvals of one country does not imply the approval of another country. The approval procedures involve high costs and are manpower
intensive, usually extend over many years and require highly skilled and professional resources.



U.S.
Food and Drug Administration Approval Process



The
steps usually required to be taken before a new drug may be marketed in the U.S. generally include:



| | ● | completion
    of pre-clinical laboratory and animal testing;
| | - | -------------------------------------------------------------



| | ● | completion
    of required chemistry, manufacturing and controls testing;
| | - | -------------------------------------------------------------------------



| | ● | the
    submission to the FDA of an IND, the application for which must be evaluated and found acceptable by the FDA before human
    clinical trials may commence;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | performance
    of (or reference to) adequate and well-controlled human clinical trials and studies to establish the safety, pharmacokinetics
    and efficacy of the proposed drug for its intended use;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | submission
    and approval of an NDA; and
| | - | ------------------------------------------



| | ● | agreement
    with FDA of the language on the package insert.
| | - | -------------------------------------------------------------





58






Clinical
studies are conducted under protocols detailing, among other things, the objectives of the study, what types of patients may enter
the study, schedules of tests and procedures, drugs, dosages, and length of study, as well as the parameters to be used in monitoring
safety, and the efficacy criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must
be submitted to the FDA as part of the IND process.



In
all the countries that are signatories of the Helsinki Declaration (including Israel), the prerequisite for conducting clinical
trials (on human subjects) is securing the preliminary approval of the competent authorities of that country to conduct medical
experiments on human subjects in compliance with the other principles established by the Helsinki Declaration.



The
clinical testing of a drug product candidate generally is conducted in three sequential phases prior to approval, but the phases
may overlap or be combined. A fourth, or post approval, phase may include additional clinical studies. The phases are generally
as follows:



| | ● | Phase
                                         I. The Phase I clinical trial is generally conducted on 8-20 healthy volunteers.
                                         Phase I clinical trials typically involve administering escalating doses of the therapeutic
                                         candidate in the healthy volunteers to assess safety, dosage tolerance, absorption, metabolism,
                                         distribution and excretion. In the case of some products for severe or life-threatening
                                         diseases, especially when the product may be too inherently toxic to ethically administer
                                         to healthy volunteers, the initial human testing is often conducted in patients;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Phase
                                         II.The Phase II clinical trial involves administering the therapeutic candidate
                                         to a small population of sick patients to identify possible adverse events, or safety
                                         risks, and preliminary indicia of efficacy for the targeted disease or condition;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Phase
                                         III. The Phase III clinical trial usually comprises 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. Specifically, the Phase III
                                         clinical trial is intended to make a comparison between the therapeutic candidate and
                                         the standard therapy and/or placebo. These trials are intended to establish the overall
                                         benefit/risk profile of the product and provide an adequate basis for product labeling;
                                         and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Phase
                                         IV. In some cases, the FDA may condition approval of an NDA for a product candidate
                                         on the sponsor’s agreement to conduct additional clinical trials after approval.
                                         In other cases, a sponsor may voluntarily conduct additional clinical trials after approval
                                         to gain more information about the drug. Such post-approval studies are typically referred
                                         to as Phase IV clinical trials.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Clinical
trials must be conducted in accordance with the FDA’s good clinical practices, or GCP, requirements. The FDA may order the
temporary or permanent discontinuation of a clinical study at any time or impose other sanctions if it believes that the clinical
study is not being conducted in accordance with FDA requirements or that the participants are being exposed to an unacceptable
health risk. An institutional review board, or IRB, generally must approve the clinical trial design and patient informed consent
at study sites that the IRB oversees and also may halt a study, either temporarily or permanently, for failure to comply with
the IRB’s requirements, or may impose other conditions. Additionally, some clinical studies, mostly in certain types of
Phase III clinical trial studies where it is required under the applicable clinical trial protocol, are overseen by an independent
group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee. This
group recommends whether or not a trial may move forward at designated check points based on access to certain data from the study.
The clinical study sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive
climate.



As
a therapeutic candidate matures through the clinical testing phases, manufacturing processes are further defined, refined, controlled,
and eventually validated around the time that the Phase III clinical trial is completed. The level of control and validation required
by the FDA increases as clinical studies progress. We and the third-party manufacturers on which we rely for the manufacture of
our therapeutic candidates and their respective components (including the APIs) are subject to requirements that drugs be manufactured,
packaged and labeled in conformity with cGMP. To comply with cGMP requirements, manufacturers must continue to spend time, money
and effort to meet requirements relating to personnel, facilities, equipment, production and process, labeling and packaging,
quality control, recordkeeping and other requirements.





59






Assuming
completion of all required testing in accordance with all applicable regulatory requirements, detailed information on the product
candidate is submitted to the FDA in the form of an NDA, requesting approval to market the product for one or more indications,
together with payment of a user fee, unless waived. An NDA includes all relevant data available from pertinent nonclinical and
clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information on
the chemistry, manufacture, controls and proposed labeling, among other things. To support marketing approval, the data submitted
must be sufficient in quality and quantity to establish the safety and efficacy of the product candidate for its intended use
to the satisfaction of the FDA.



If
an NDA submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the Prescription Drug User Fee Act,
or PDUFA, the FDA’s goal is to complete its initial review and respond to the applicant within ten months of submission,
unless the application relates to an unmet medical need, or is for a serious or life-threatening indication, in which case the
goal may be within six months of NDA submission. However, PDUFA goal dates are not legal mandates and the FDA response often occurs
several months beyond the original PDUFA goal date. Further, the review process and the target response date under PDUFA may be
extended if the FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding information
already provided in the NDA. The NDA review process can, accordingly, be very lengthy. During its review of an NDA, 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.
Data from clinical studies are not always conclusive and the FDA and/or any advisory committee it appoints may interpret data
differently than the applicant.



After
the FDA evaluates the NDA and performs a pre-approval inspection, or “PAI”, on manufacturing facilities where the
drug product and/or its API will be produced, the FDA will either approve commercial marketing of the therapeutic candidate with
prescribing information for specific indications or issue a complete response letter indicating that the application is not ready
for approval and stating the conditions that must be met in order to secure approval of the NDA. If the complete response letter
requires additional data and the applicant subsequently submits that data, the FDA nevertheless may ultimately decide that the
NDA does not satisfy its criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategies,
or REMS, plan 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 post-marketing testing. Such post-marketing testing may include Phase IV clinical trials and surveillance to further
assess and monitor the product’s safety and efficacy after approval. Regulatory approval of drug product candidates for
serious or life-threatening indications may require that participants in clinical studies be followed for long periods to determine
the overall survival benefit of the drug product candidate.



If
the FDA approves one of our therapeutic candidates, we will be required to comply with a number of post-approval regulatory requirements.
We would be required to report, among other things, certain adverse reactions and production problems to the FDA, provide updated
safety and efficacy information and comply with requirements concerning advertising and promotional labeling for any of our therapeutic
candidates. Also, quality control and manufacturing procedures must conform to cGMP for approved drug products after our NDA is
approved, if at all, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes
extensive procedural, substantive and record keeping requirements. If we seek to make certain changes to an approved product,
such as certain manufacturing changes, we will need FDA review and approval before the change can be implemented. For example,
if we change the manufacturer of a product or our API, the FDA may require stability or other data from the new manufacturer,
and such data will take time and are costly to generate, and the delay associated with generating these data may cause interruptions
in our ability to meet commercial demand, if any. While physicians may use products for indications that have not been approved
by the FDA, we may not label or promote the product for an indication that has not been approved. Securing FDA approval for new
indications is similar to the process for approval of the original indication and requires, among other things, submitting data
from adequate and well-controlled studies that demonstrate the product’s safety and efficacy in the new indication. Even
if such studies are conducted, the FDA may not approve any change in a timely fashion, or at all.





60






Section
505(b)(2) New Drug Applications



We
intend to submit applications for KIT-302 and any other therapeutic candidates that comprise APIs of one or more previously approved
drug products that we may develop in the future via the 505(b)(2) regulatory pathway. A drug sponsor may file a 505(b)(2) NDA,
instead of a “stand-alone” or “full” NDA: a 505(b)(1) NDA. Section 505(b)(2) of the Food, Drug, and Cosmetic
Act, or FDC, was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the
Hatch-Waxman Amendments. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for
approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.
Since the studies or clinical trials have already been successfully performed and reviewed by the FDA, the 505(b)(2) NDA can expedite
the approval process. Generally, the application is typically used for drug approval to treat new indications of a previously
approved drug or new formulations of previously-approved products. Some examples of products that may be allowed to follow a 505(b)(2)
path to approval are drugs that have a new dosage form, strength, route of administration, formulation or indication.



The
Hatch-Waxman Amendments permit the applicant to rely upon certain published nonclinical or clinical studies conducted for an approved
product or the FDA’s conclusions from prior review of such studies. The FDA may require companies to perform additional
studies or measurements to support any changes from the approved product. The FDA may then approve the new product for all or
some of the labeled indications for which the reference product has been approved, as well as for any new indication supported
by the Section 505(b)(2) application. While references to nonclinical and clinical data not generated by the applicant or for
which the applicant does not have a right of reference are allowed, all development, process, stability, qualification and validation
data related to the manufacturing and quality of the new product must be included in an NDA submitted under Section 505(b)(2).



To
the extent that the Section 505(b)(2) applicant is relying on the FDA’s conclusions regarding studies conducted for an already
approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the
FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book. Specifically, the applicant
must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed
patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed
patent is invalid or will not be infringed by the new product. The Section 505(b)(2) application also will not be approved until
any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for
the reference product has expired. Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in
the development of its products only to be subject to significant delay and patent litigation before its products may be commercialized.



Section
505(b)(1) New Drug Applications



A
Section 505(b)(1) NDA, known as the “full NDA,” is an application that contains full reports of investigations of
safety and efficacy performed by the drug sponsor. NT219 is not a combination therapeutic candidate or a therapeutic candidate
that is comprised of an API that has already undergone some or all necessary human clinical trials in another therapeutic candidate.
Therefore, if NT219 is approved for human clinical trials by the FDA or any foreign regulatory agency, and shows adequate safety
and efficacy data in human clinical trials, we anticipate that NT219 will require a 505(b)(1) NDA.



Special
Protocol Assessment



The
special protocol assessment, or SPA, process is designed to facilitate the FDA’s review and approval of drugs by allowing
the FDA to evaluate the proposed design and size of Phase III clinical trials that are intended to form the primary basis for
determining a drug product’s efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol
and respond to a sponsor’s questions regarding, among other things, primary efficacy endpoints, trial design and data analysis
plans, within 45 days of receipt of the request.





61






The
FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to support regulatory approval
of the therapeutic candidate with respect to effectiveness of the indication studied. All agreements and disagreements between
the FDA and the sponsor regarding an SPA must be clearly documented in an SPA letter or the minutes of a meeting between the sponsor
and the FDA.



Even
if the FDA agrees to the design, execution and analyses proposed in protocols reviewed under the SPA process, the FDA may revoke
or alter its agreement, such as under the following circumstances:



| | ● | public health concerns emerge that were unrecognized
at the time of the protocol assessment, or the director of the review division determines that a substantial scientific issue
essential to determining safety or efficacy has been identified after testing has begun;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                            
| | ● | a sponsor fails to follow a protocol that was agreed
upon with the FDA; or                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                            
| | ● | the relevant data, assumptions or information provided
by the sponsor in a request for SPA change, are found to be false statements or misstatements, or are found to omit relevant facts.                                                                                 



In
addition, a documented SPA may be modified, and such modification will be deemed binding on the FDA review division, except under
the circumstances described above, if the FDA and the sponsor agree in writing to modify the protocol and such modification is
intended to improve the study. We have obtained an SPA with the FDA for our Phase III clinical trial protocol for KIT-302.



FDA
Guidelines on Anti-Hypertensive Drugs



In
March 2011, the FDA published a new draft guideline stating that drugs designed to be anti-hypertensive may include in the usage
indication section of the package insert a statement that “Reduced blood pressure decreases the risk of suffering fatal
and non-fatal cardiovascular events, mainly stroke and myocardial infarction”. We do not intend to prove through the Company’s
clinical trials that the KIT-302 therapeutic candidate reduces the risk of suffering from the aforesaid diseases. Nevertheless,
we expect that the said draft guideline will have a positive effect on the KIT-302 combination therapeutic candidate we are currently
developing because the combination therapeutic candidate we are developing is intended to prevent hypertension. The FDA has informed
us in writing that the package insert of the KIT-302 combination drug product may contain the statement provided in the draft
guideline.



European
Regulatory Authorities



In
the event that we wish to perform trials in Europe or market or sell our KIT302 therapeutic candidate in Europe, we must apply
to an applicable country’s regulatory authorities with a request to approve our therapeutic candidates according to the
Mutual Recognition Procedure (MRP), which is a procedure applied by European Directive No. 2001/83/EC that enables access to medicinal
products (drugs) in 27 countries of the European Union. The MRP approval process requires the applicant to receive approval in
one of the EU countries and then apply for recognition of the other member countries to acknowledge the approval within their
territory. It is not currently known whether the European regulatory authorities will require additional studies in order to grant
their approval to market KIT-302 in Europe. Other therapeutic candidates, such as NT219, may be approved through either the MRP
or through the Centralized Process in which a single application provides approval for all EU member states.



The
Israeli Ministry of Health



Our
operations are subject to permits from the Israeli Ministry of Health on two levels:



First,
pertaining to the import of drugs and/or raw materials, we are required to apply to the Ministry of Health for approval from its
medical accessories and devices unit (AMR).





62






Second,
pertaining to research and development, when we conduct trials in human, the trials will be subject to the approval of the Helsinki
Committee, which acts by force of the Public Health Regulations (Trials in Human Beings), 1980 (Trials in Human Subjects Regulations)
and according to the guidelines of the Helsinki declaration, or any other approval required by the Ministry of Health. According
to the Trials in Human Beings Regulations, the Helsinki Committee must plan and approve every experimental process that involves
human beings. The Helsinki Committee is an institutional committee that acts in the medical institution where the trial is performed
and is the party that approves and supervises the entire trial process. In practice, the physician, who is the chief researcher,
submits a trial protocol to the committee on behalf of the requesting party. The committee forwards its decisions regarding the
requests for medical trials that were approved by the committee to the manager of the medical institute and the manager has the
authority to approve the requests without additional approval of the Ministry of Health. According to the procedure for medical
trials in human beings of the Ministry of Health, the Helsinki Committee will not approve performance of a medical trial, unless
it is absolutely convinced that the following conditions, among others, are fulfilled: (a) the expected benefits for the participant
in the medical trial and to the requesting party to Left the risk and the inconvenience involved in the medical trial to its
participant; (b) the available medical and scientific information justifies the performance to the requested medical trial; (c)
the medical trial is planned in a scientific manner that enables a solution to the tested question and is described in a clear,
detailed and precise manner in the protocol of the medical trial, conforming with the Helsinki principles declaration; (d) the
risk to the participant in the medical trial is as minimal as possible; (e) optimal monitoring and follow-up of the participant
in the medical trial; (f) the initiator, the chief researcher and the medical institute are capable and undertake to allocate
the resources required for adequate execution of the medical trial, including qualified personnel and required equipment; and
(g) the nature of the commercial agreement with the chief researcher and the medical institute does not impair the adequate performance
of the medical trial.



All
phases of clinical studies conducted in Israel must be conducted in accordance with the Trials in Human Subjects Regulations,
including amendments and addenda thereto, the Guidelines for Clinical Trials in Human Subjects issued by the Israel Ministry of
Health (the Guidelines) and the International Conference for Harmonized Tripartite Guideline for Good Clinical Practice. The regulations
and the Guidelines stipulate that a medical study on humans will only be approved after the Helsinki Committee at the hospital
intending to perform the study has approved the medical study and notified the relevant hospital director in writing. In addition,
certain clinical studies require the approval of the Ministry of Health. The Helsinki Committee will not approve the performance
of the medical study unless it is satisfied that it has advantages to the study participants and society at large that Left
the risk and inconvenience for the participants and that the medical and scientific information justifies the performance of the
requested medical study. The relevant hospital director, and the Ministry of Health, if applicable, also must be satisfied that
the study is not contrary to the Helsinki Declaration or to other regulations. The Ministry of Health also licenses and regulates
the marketing of pharmaceuticals in Israel, requiring the relevant pharmaceutical to meet internationally recognized cGMP standards.



Pervasive
and continuing regulation in the U.S.



After
a drug is approved for marketing and enters the marketplace, numerous regulatory requirements continue to apply. These include,
but are not limited to:



| | ● | cGMP guidance for APIs and 21 CFR §§ 210,
211 regulations, both observed by the FDA, require manufacturers, including third party manufacturers, to follow stringent requirements
for the methods, facilities and controls used in manufacturing, processing and packing of a drug product;                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | labeling regulations and the FDA prohibitions against
the promotion of drugs for unapproved uses (known as off-label uses), as well as requirements to provide adequate information
on both risks and benefits during promotion of the drug;                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | approval of product modifications or use of a drug for
an indication other than approved in an NDA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | adverse drug experience regulations, which require us
to report information on adverse events during pre-market testing;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | post-market testing and surveillance requirements, including
Phase IV trials, when necessary to protect the public health or to provide additional safety and effectiveness data for the drug;
and                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ● | the FDA’s recall authority, whereby it can ask,
or under certain conditions order, drug manufacturers to recall from the market a product that is in violation of governing laws
and regulation. After a drug receives approval, any modification in conditions of use, active ingredient(s), route of administration,
dosage form, strength or bioavailability, will require a new approval, for which it may be possible to submit a 505(b)(2), accompanied
by additional clinical data necessary to demonstrate the safety and effectiveness of the product with the proposed changes. Additional
clinical studies may be required for proposed changes.





63






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;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
                                         so-called federal “Sunshine Act”, which requires certain pharmaceutical and
                                         medical device companies to monitor and report certain financial relationships with physicians
                                         and other healthcare providers to CMS for disclosure to the public;                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | 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. This statute also 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; and



| | ● | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





64






Reimbursement



Sales
of our therapeutic candidates in the United States may depend, in part, on the extent to which the costs of the therapeutic candidates
will be covered by third-party payers, such as government health programs, commercial insurance and managed health care organizations.
These third-party payers are increasingly challenging the prices charged for medical products and services. Additionally, the
containment of health care costs has become a priority of federal and state governments, and the prices of drugs have been a focus
in this effort. The United States government, state legislatures and foreign governments have shown significant interest in implementing
cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic
products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions
with existing controls and measures, could further limit our net revenue and results. If these third-party payers do not consider
our therapeutic candidates to be cost-effective compared to other available therapies, they may not cover our therapeutic candidates
after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our
therapeutic candidates on a profitable basis.



The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, (the MMA), imposed new requirements for the distribution
and pricing of prescription drugs for Medicare beneficiaries and included a major expansion of the prescription drug benefit under
Medicare Part D. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities which
will provide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription drug benefit plans
and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Parts A and B, Part D coverage is
not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan
can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription
drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily
all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed
by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for
therapeutic candidates for which we receive marketing approval. However, any negotiated prices for our therapeutic candidates
covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the
MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment
limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction
in payments from non-governmental payers.



On
February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This law provides funding
for the federal government to compare the effectiveness of different treatments for the same illness. A plan for the research
will be developed by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National
Institutes of Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although
the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payers,
it is not clear how such a result could be avoided and what if any effect the research will have on the sales of our therapeutic
candidates, if any such therapeutic candidates or the condition that it is intended to treat is the subject of a study. It is
also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect
the sales of our therapeutic candidates. Decreases in third-party reimbursement for our therapeutic candidates or a decision by
a third-party payer to not cover our therapeutic candidates could reduce physician usage of the therapeutic candidates and have
a material adverse effect on our sales, results of operations and financial condition.



The
Patient Protection and Affordable Care Act



On
March 23, 2010, President Obama signed into legislation the Patient Protection and Affordable Care Act, which was subsequently
amended by the Healthcare and Education Reconciliation Act (as amended, the Affordable Care Act). The Affordable Care Act resulted
in sweeping changes across the health care industry. The primary goal of this comprehensive legislation was to extend health insurance
coverage to currently uninsured legal U.S. residents through a combination of public program expansion and private sector health
insurance reforms. To fund the expansion of insurance coverage, the Affordable Care Act contains measures designed to promote
quality and cost efficiency in health care delivery and to generate budgetary savings in the Medicare and Medicaid programs. The
Affordable Care Act’s provisions are designed to encourage providers to find cost savings in their clinical operations.
Pharmaceuticals represent a significant portion of the cost of providing care. Through modified reimbursement rates and other
incentives, the U.S. government is requiring that providers identify the most cost-effective services, supplies and pharmaceuticals.
This environment has caused changes in the purchasing habits of providers and resulted in specific attention to the pricing negotiation,
product selection and utilization review surrounding pharmaceuticals. This attention may result in our therapeutic candidates
being chosen less frequently or the pricing being substantially lowered. Additionally, the Affordable Care Act is expected to
expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under
the Medicare Part D program. We cannot predict the impact of the Affordable Care Act on pharmaceutical companies as many of the
Affordable Care Act reforms require the promulgation of detailed regulations implementing the statutory provisions which has not
yet occurred. The legislation also includes significant provisions that encourage state and federal law enforcement agencies to
increase activities related to preventing, detecting and prosecuting those who commit fraud, waste and abuse in federal healthcare
programs, including Medicare, Medicaid and Tricare. Since the enactment of the Affordable Care Act, numerous regulations have
been issued providing further guidance on its requirements. Some of the provisions of the Affordable Care Act have not yet been
fully implemented, and certain provisions have been subject to judicial and Congressional challenges. The healthcare regulatory
environment in the United States is still in flux, and judicial challenges and legislative initiatives to modify, limit, or repeal
the Affordable Care Act continue and may increase in light of the change in administrations following the most recent United States
Presidential election. Several states have decided not to expand their Medicaid programs and are seeking alternative reimbursement
models to provide care to the uninsured. The manner in which these issues are resolved could materially affect the extent to which
and the amount at which pharmaceuticals are reimbursed by government programs such as Medicare, Medicaid and Tricare.





65






Grants
from the National Authority for Technological Innovation, or the Innovation Authority (formerly known as the Office of the Chief
Scientist or the OCS).



Under
the Encouragement of Research, Development and Technological Innovation in the Industry Law 1984, or the Innovation Law, formerly
known as The Law for the Encouragement of Industrial Research and Development, 1984, or the R&D Law, a qualifying research
and development program is eligible for grants of up to 50% of the program’s research and development expenses. The recipient
of the grants is required to return the grants by the payment of royalties on the revenues generated from the sale of products
(and related services) developed (in all or in part) according to, or as a result of, a research and development program funded
by the OCS (at rates which are determined under the Innovation Law up to the aggregate amount of the total grants received by
the OCS, plus annual interest (as determined in the Innovation Law). Following the full payment of such royalties and interest,
there is generally no further liability for royalty payment. Nonetheless, the restrictions under the Innovation Law (as generally
specified below) will continue to apply even after repayment of the full amount of royalties payable pursuant to the grants.



The
pertinent obligations under the Innovation Law are as follows:





| | ● | Local Manufacturing Obligation. The terms of the grants under the Innovation Law require that a company which
received OCS grants, must manufacture the products developed these grants in Israel. In general, the products may be manufactured
outside Israel only if prior approval is received from the OCS and subject to payment of increased royalties cap of up to 300%
of the grants, depending on the manufacturing volume that is performed outside Israel.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Certain
                                         reporting obligations. A recipient of OCS grant is required to notify the Innovation
                                         Authority of certain events enumerated in the Innovation Law.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                             

| | ● | Know-How
                                         transfer limitation. The Innovation Law restricts the ability to transfer know-how funded
                                         by the OCS (including by a way of license for R&D purposes) outside of Israel. Transfer
                                         of OCS funded know-how outside of Israel requires prior OCS approval and in certain circumstances
                                         is subject to payment of a redemption fee to the OCS calculated according to formulae
                                         provided under the Innovation Law (which such fee will not exceed 600% of the grants
                                         amount plus interest). Upon payment of such fee, the know-how and the manufacturing rights
                                         of the products supported by such OCS funding cease to be subject to the Innovation Law.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Approval
of the transfer of OCS funded know-how to another Israeli company may be granted only if the recipient abides by all the provisions
of the law and related regulations, including the restrictions on the transfer of know-how and manufacturing rights outside of
Israel (such transfer will include an obligation to pay royalties to the OCS from the income of such sale transaction as part
of the royalty payment obligation).



Approval
to manufacture products outside of Israel or consent to the transfer OCS funded know-how, if requested, might not be granted or
may be granted on terms that are not acceptable to us.





66






These
restrictions may impair our ability to enter into agreements to perform or outsource manufacturing outside of Israel, or otherwise
transfer or sell TyrNovo’s OCS funded know-how outside of Israel without the approval of the OCS. Furthermore, in the event that
we, through TyrNovo, undertake a transaction involving the transfer to a non-Israeli entity of know-how developed with OCS funding
pursuant to a merger or similar transaction, the consideration available to TyrNovo’s and/or our shareholders may be reduced by
the amounts it is required to pay to the OCS. Any approval, if given, will generally be subject to additional financial obligations.
Failure to comply with the requirements under the Innovation Law may subject TyrNovo to mandatory repayment of grants received
by it (together with interest and penalties), as well as may expose TyrNovo to criminal proceedings. In addition, the Government
of Israel may from time to time audit sales of products which it claims incorporate technology funded via OCS programs and this
may lead to additional royalties being payable on additional products, and may subject such products to the restrictions and obligations
specified hereunder.



To
date, TyrNovo’s technology has received grants from the OCS in a total amount of approximately NIS5.5 million. Up until
the date of this Annual Report on Form 20-F, no royalties have paid in respect to the grants received by the OCS. There is no
guarantee that TyrNovo will receive any further grants from the OCS or that the grants will be in the scope received in the past.



On
July 29, 2015, the R&D Law was amended (“Amendment No. 7”) ushering in the formation of the Innovation Authority.
The Innovation Authority is authorized to change the current restrictions imposed on recipients of grants under the R&D Law
with a new set of arrangements in connection with ownership obligations of know-how (including with respect to restrictions on
transfer of know-how and manufacturing activities outside of Israel), as well as royalties obligations associated with approved
programs. As of the date of this annual report on Form 20-F, we are unable to determine whether the Innovation Authority will
promulgate new set of arrangements or adopt the arrangements which were stipulated under the R&D Law as existed prior to the
amendment. Therefore, as of the date of this annual report on Form 20-F, we are unable as assess the effect, if any, of the promulgation
of such arrangements on us and/or our subsidiary.



It should be noted that
the OCS is in the process of promulgating rules which deals with granting of licenses to use, especially for R&D purposes,
know-how developed as a result of research financed by the OCS. Such rules may have an effect on TyrNovo, in respect of the amount
of payments due to the Israeli government for the grant of licenses to third parties by TyrNovo. As of the date of filing of this
report, we are unable to assess the effect, if any, of the promulgation of such rules on us and/or TyrNovo.





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



Our
corporate structure consists of Kitov Pharmaceuticals Holdings Ltd., incorporated in the State of Israel, and (i) Kitov Parent’s
wholly owned operating subsidiary, Kitov Pharmaceuticals Ltd., an Israeli limited corporation which was founded in June 2010 and
(ii) Kitov Parent’s majority owned subsidiary TyrNovo Ltd. which it acquired in January 2017.



On April 25, 2017, the
boards of directors of each of Kitov Parent and Kitov Pharmaceuticals approved a merger between the two entities, with Kitov Parent
remaining as the surviving entity. The respective boards of directors each determined (i) that this merger is in the best interests
of the companies and their respective shareholders, (ii) that considering the financial position of the companies, no reasonable
concern exists that Kitov Parent, as the absorbing and surviving company, will be unable to fulfill its obligations to its creditors,
and (iii) taking into account the abovementioned, as well as the corporate management and economic benefits to the two companies
resulting from completing the merger, they approved the merger. In accordance with the Companies Law, the proposed merger between
Kitov Parent and Kitov Pharmaceuticals will not require shareholder approvals. The boards of directors are jointly preparing a
merger proposal for submission to the Israeli Registrar of Companies. Creditor notices are being prepared as provided by the regulations
promulgated under the Companies Law. Upon the request of a creditor of either entity 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 the target company. The court may also give instructions in order to secure the rights
of creditors. In addition, the proposed 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 with the Israeli Registrar of Companies and 30 days from April 25. 2017. We expect the merger
will be completed prior to the end of the second quarter of 2017.







67






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



All
of our facilities are leased, and we do not own any real property. Our principal executive offices are located in the Round Tower
in the Azrieli Center, Tel-Aviv, Israel. The space is in a commercial office building and has approximately 100 square meters
pursuant to a 60-month lease which commenced on January 1, 2015. In addition, we sub-lease a 20 square meter office space at 11
Beit Hadfus Street, Jerusalem, Israel pursuant to a sub-lease agreement entered into on July 16, 2014 with a third party which
terminates on July 31, 2017. We have no material tangible fixed assets apart from the properties described above. We believe our
facilities are adequate and suitable for our current needs.



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



Not
applicable.



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



You
should read the following discussion of our financial condition and results of operations in conjunction with the financial statements
and the notes thereto included elsewhere in this Annual Report on Form 20-F. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere
in this Annual Report on Form 20-F, particularly those in “Item 3. Key Information – D. Risk Factors.” See also”Special Note Regarding Forward-Looking Statements.”



We
are a biopharmaceutical company currently focused on the development of (i) KIT-302, a combination drug for the simultaneous treatment
of two clinical conditions: pain caused by osteoarthritis and hypertension (high blood pressure), which can be pre-existing or
caused by the treatment for osteoarthritis, and (ii) NT219, a small molecule that we believe presents a new concept in cancer
therapy by promoting the degradation of two oncology-related checkpoints



KIT-302
is based on the generic drugs celecoxib and amlodipine besylate. Celecoxib is the active ingredient of a known and approved-for-use
drug designed primarily to relieve pain caused by osteoarthritis. Celecoxib is the active ingredient in the branded drug “Celebrex®”.
This combination is designed to simultaneously relieve pain caused by osteoarthritis and treat hypertension, which is one of the
side effects of using non-steroidal anti-inflammatory drugs, or NSAIDs, for treating pain caused by osteoarthritis.



In
January 2017, Kitov Parent acquired a majority of the shares in TyrNovo, a privately held Israeli developer of novel small molecules
in the oncology therapeutic field. TyrNovo’s NT219 therapeutic candidate works by overcoming tumors’ cancer drug resistance
and would be developed as a drug to be used in combination with other cancer drugs or treatments. The NT219 technology has been
tested in a number of PDX models where human cancer cells are taken and transplanted into mice and then used to test various cancer
drugs. NT219 has been tested against various classes of cancer drugs that have been recently developed as well as older standard
chemotherapy.



In
addition, we may consider the acquisition of therapeutic candidates or existing drug products, at various stages of development
in various therapeutic areas. We currently have no binding agreements or commitments to complete any transaction for the possible
acquisition of new therapeutic candidates. There is no certainty that we will be able to complete any additional transactions
for the possible acquisition of new therapeutic candidates. We may not be able to identify suitable acquisition candidates, complete
acquisitions or integrate acquisitions successfully. In this regard, acquisitions involve numerous risks, including difficulties
in the integration of the acquired therapeutic candidates and the diversion of management’s attention from other business
concerns. Although we will endeavor to evaluate the risks inherent in any particular transaction, there can be no assurance that
we will properly ascertain all such risks. In addition, acquisitions could result in the incurrence of substantial additional
indebtedness and other expenses or in potentially dilutive issuances of equity securities. There can be no assurance that difficulties
encountered with acquisitions will not have a material adverse effect on our business, financial condition and results of operations.





68






We
intend to seek FDA approval for the commercialization of our therapeutic candidates, and where applicable through the Section
505(b)(2) regulatory path under the Federal Food, Drug, and Cosmetic Act of 1938, as amended. Where applicable, we also intend
to seek corresponding regulatory paths for approval in other foreign jurisdictions. Our current pipeline consists of two clinical
development therapeutic candidates: (i) KIT-302, which has recently successfully completed its Phase III clinical trial and which
will be subject to review and approval by the FDA and (ii) NT219, which is in a preclinical stage. Upon and subject to receipt
of the requisite approvals, we intend to commercialize our therapeutic candidates through licensing and other commercialization
arrangements with pharmaceutical companies on a global and/or territorial basis. We may also evaluate, on a case by case basis,
co-development and similar arrangements, as well as independent commercialization of our therapeutic candidates.



On
July 11, 2013, Kitov Parent (then known as Mainrom Line Logistics Ltd.) acquired issued and outstanding shares of Kitov Pharmaceuticals,
in exchange for the issuance by Kitov Parent to Kitov Pharmaceuticals’ shareholders of ordinary shares constituting, immediately
following such issuance, approximately 63.75% of the fully diluted share capital of Kitov Parent (subject to an issuance of additional
ordinary shares of Kitov Parent to Kitov Pharmaceuticals’ shareholders following the attainment of a milestone in connection
with our Phase III clinical trial for KIT-302, which issuance of additional shares was completed on December 24, 2015). See “Item
7. Major Shareholders and Related Party Transactions – B. Related Party Transactions – Share Transfer Agreement with
Kitov Pharmaceuticals”. The acquisition was accounted for under IFRS as issued by the IASB, as a reverse merger, and therefore
the consolidated financial statements of Kitov Parent presented in this Annual Report on Form 20-F include the financial results
of Kitov Pharmaceuticals for the four years ended December 31, 2016, 2015, 2014, and 2013 and of Kitov Parent for the period from
July 11, 2013 to December 31, 2016. On April 25, 2017, the boards of directors of each of Kitov Parent and Kitov Pharmaceuticals
approved a merger between the two entities, with Kitov Parent remaining as the surviving entity. For more information on the proposed
merger, see Item 4.C – Organizational Structure.



History
of Losses



Since
commencement of our pharmaceutical research and development operations, we have generated significant losses mainly in connection
with the research and development of our therapeutic candidates. Such research and development activities are expected to expand
over time and will require further resources if we are to be successful. As a result, we expect to continue incurring operating
losses, which may be substantial over the next several years, and will need to obtain additional funds to further develop our
research and development programs. As of December 31, 2016, we had an accumulated deficit of approximately $26.2 million.



We
plan to fund our future operations through commercialization and out-licensing of our therapeutic candidates and to raise additional
capital in the future through either debt or equity financing. We believe our existing working
capital will be sufficient to meet our present requirements through at least the next twelve months.



Components
of Statement of Operations



Research
and Development Expenses



See
“C. Research and Development, Patents and Licenses” below.



General
and Administrative Expenses



General
and administrative expenses consist primarily of compensation for directors, employees and consultants in executive and operational
functions. Other significant general and administrative expenses include professional fees for outside accounting and legal services,
travel costs and insurance premiums.





69






Other
Expenses



Other
expenses represent payments made to Mr. Sheer Roichman as required by the Share Transfer Agreement. See “Item 7. Major Shareholders
and Related Party Transactions – B. Related Party Transactions – Share Transfer Agreement with Kitov Pharmaceuticals”.



Finance
Income and Finance Expense



Finance
Expense comprises primarily changes in the fair value of financial liabilities as well as interest and fees in connection with
loans from third parties and related parties. Finance Income comprises changes in the fair value of financial liabilities.



Critical
Accounting Policies and Estimates



The
preparation of financial statements in conformity with IFRS as issued by the IASB, requires companies to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates
and judgments are subject to an inherent degree of uncertainty and actual results may differ. Our significant accounting policies
are more fully described in Note 3 to our annual financial statements included elsewhere in this Annual Report on Form 20-F. Critical
accounting estimates and judgments are evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances, and are particularly important to the portrayal of
our financial position and results of operations.



Share-based
compensation



In
accordance with IFRS 2 Share – based Payment, the grant of stock options to our employees for services rendered represents
a supplementary benefit. Under IFRS 2 Share – based Payment, we estimate the fair value of these stock options at the grant
date and record the value within shareholders’ equity. Fair value is determined using a standard option pricing model that
takes into account the specific features of the stock option plan (net price, period of exercise, etc.), market data at the grant
date (such as price, volatility, etc.) and behavioral assumptions relating to option holders. Different assumptions could result
in material changes to the expense amounts recorded for these options.



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



Comparison
of the Year Ended December 31, 2016 to the Year Ended December 31, 2015



Research
and Development Expenses



Research
and development expenses for the year ended December 31, 2016 were $4.2 million, an increase of $1.6 million, or 63%, compared
to $2.6 million for the year ended December 31, 2015. The increase resulted primarily from expenses for an additional PK study
we conducted in 2016, expenses associated with the preparation of our New Drug Application for KIT-302, and expenses for our renal
function clinical trial that commenced in 2016.



General
and Administrative Expenses



General
and administrative expenses for the year ended December 31, 2016 were $3.0 million, an increase of $1.5 million, or 99%, compared
to $1.5 million for the year ended December 31, 2015. The increase resulted from an increase in salaries and related expenses,
including the addition of our Vice-President of Business Development, and expenses related to Kitov Parent’s securities
being listed on the NASDAQ since November 2015.



Operating
Loss



Operating
loss increased to $7.2 million during the year ended December 31, 2016 from $4.1 million during the year ended December 31, 2015
primarily due to the increases in Research and Development Expenses and General and Administrative Expenses, as described above.





70






Finance
Income/Expense



Finance
income, net for the year ended December 31, 2016 was $77,000 and is primarily related to income from bank deposits, net of exchange
rate differences. In addition, Kitov recorded a net expense of $ 5.0 million due to the net change in the fair value of derivatives.
Finance expense, net for the year ended December 31, 2015 was $133,000 and was primarily related to exchange rate differences.



Loss
for the Period



Kitov’s
net loss before finance expenses due to fair value adjustments of derivative instruments (primarily Kitov Parent’s Series
A Warrants traded on NASDAQ) for the year ended December 31, 2016 amounted to $7.2 million, compared with a loss of $4.1 million
for the year ended December 31, 2015.



In
addition, a non-cash expense of $5.0 million was incurred due to the change in the fair value of derivative instruments. This
change in fair value relates primarily to Kitov Parent’s Series A Warrants which included anti-dilution protection. The
anti-dilution protection expired in November 2016.



Comparison
of the Year Ended December 31, 2015 to the Year Ended December 31, 2014



Research
and Development Expenses



Research
and development expenses decreased to $2.560 million during the year ended December 31, 2015 from $3.192 million during the year
ended December 31, 2014. This decrease was primarily due to the offset of amounts to be paid to us under the terms of our agreement
with Dexcel. See “Item 10. Additional Information – C. Material Contracts – Development Services Agreement with
Dexcel”.



General
and Administrative Expenses



General
and administrative expenses increased to $1.509 million during the year ended December 31, 2015 from $1.269 million during the
year ended December 31, 2014. This increase was primarily due to rent expense incurred upon our move into new offices in January
2015 and additional travel expenses.



Other
Expenses



During
the year ended December 31, 2014, other expenses were NIS 2.5 million (approximately $720,000 based on the representative rate
of exchange on the date of payment, March 12, 2014) due to the payment to Mr. Sheer Roichman as required by the Share Transfer
Agreement. See “Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions –
Share Transfer Agreement with Kitov Pharmaceuticals”. During the year ended December 31, 2015 there were no other expenses.



Operating
Loss



Operating
loss decreased to $4.069 million during the year ended December 31, 2015 from $5.181 million during the year ended December 31,
2014 primarily due to the decrease in research and development expenses and the lack of other expenses described above.



Finance
Expense



Net
finance expense increased to $133,000 during the year ended December 31, 2015 from $71,000 during the year ended December 31,
2014 primarily resulting from a greater change in the fair value of financial liabilities associated with Kitov Parent’s
series 2 warrants.





71






Loss
for the Period



Loss
for the period decreased to $4.202 million during the year ended December 31, 2015 from $5.252 million during the year ended December
31, 2014 primarily due to the decrease in research and development expenses and the lack of other expenses described above.



JOBS
Act



On
April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was signed into law. Section 107 of the JOBS Act provides
that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act for complying with new or revised accounting standards. This means that an “emerging growth company”
can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have
elected to utilize this exemption and, therefore, we will not be subject to the same new or revised accounting standards as other
public companies that are not emerging growth companies. In addition, as a result of this election, our future financial statements
may not be comparable to those of public companies that are not emerging growth companies and are required to comply with public
company effective dates for new or revised accounting standards.



Subject
to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we also elected or may elect to
rely on other exemptions, including without limitation, not (i) providing an auditor’s attestation report on our system
of internal controls over financial reporting pursuant to Section 404 and (ii) complying with any requirement that may be adopted
by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor discussion and analysis). These
exemptions will apply until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues
of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the closing of our initial public
offering on NASDAQ on November 25, 2015; (c) the date on which we have, during the previous three-year period, issued more than
$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under
the Exchange Act.



|B. | Liquidity and Capital Resources
|-- | -------------------------------



Our
therapeutic candidates are in the research and development stage and therefore do not generate revenues. Since commencement of
our operations as a pharmaceutical research and development company, our activities have been financed by equity offerings and
private loans. We have raised an aggregate of approximately NIS 4.1 million (approximately $1.137 million) from private loans
(all of which have been repaid) and gross proceeds of approximately NIS 33.5 million (approximately $9.2 million based on the
representative rates of exchange on the dates of the closings, March 3, 2014, September 3, 2014, and March 30, 2015) from our
public offerings on the TASE, approximately $13.0 million from our initial public offering on NASDAQ in November 2015 (described
below) and approximately $12.0 million for our follow-on public offering on NASDAQ in July 2016 (described below). The proceeds
from the public offerings were used to repay the private loans and to fund our ongoing operations. As of December 31, 2016, we
had on hand approximately $14.7 million in cash and cash equivalents, and in short term deposits.



We
believe that our current cash and cash equivalents are sufficient to complete the research and development of KIT-302 until its
anticipated approval for marketing by the FDA in 2018 and to fund our planned research and development costs for NT219 until reaching
the IND stage. Since we do not know when we will begin to generate significant revenues from our therapeutic candidates, if ever,
should we decide to develop KIT-301 and any additional therapeutic candidates, we may need substantial additional funds to acquire,
develop, and/or commercialize such therapeutic candidates. However, additional financing may not be available on acceptable terms,
if at all. Our long term capital requirements will depend on many factors, including:



| | ● | the
    regulatory path of our therapeutic candidates;                                                                                                                                             
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                    
| | ● | our
    ability to successfully commercialize our therapeutic candidates, including securing commercialization agreements with third
    parties and favorable pricing and market share;           
| |   |                                                                                                                                                                                                    
| | ● | the
    progress, success and cost of our preclinical and/or clinical trials and research and development programs;                                                                                
| |   |                                                                                                                                                                                                    
| | ● | the
    costs, timing and outcome of regulatory review and obtaining regulatory approval of our therapeutic candidates and addressing
    regulatory and other issues that may arise post-approval;
| |   |                                                                                                                                                                                                    
| | ● | the
    costs of obtaining and enforcing our issued patents and defending intellectual property-related claims;                                                                                    
| |   |                                                                                                                                                                                                    
| | ● | the
    costs of developing sales, marketing and distribution channels; and                                                                                                                        
| |   |                                                                                                                                                                                                    
| | ● | our
    consumption of available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner
    than anticipated.                                      





72






If
we are unable to commercialize or out-license our therapeutic candidates or obtain future financing, we may be forced to delay,
reduce the scope of, or eliminate one or more of our research and development programs related to the therapeutic candidates,
which may have a material adverse effect on our business, financial condition and results of operations.



Cash
Flow



Operating
activities



For
the year ended December 31, 2016, net cash flow used in operating activities was approximately $6.3 million compared to approximately
$3.3 million for the year ended December 31, 2015. The increase in net cash flow used in operating activities was due to increased
Research and Development and General and Administrative expenses described above. The operating activities consisted of the conduct
of PK studies for the combination drug, KIT-302, by Dexcel, expenses associated with the preparation of our New Drug Application
for KIT-302, and expenses for our renal function clinical trial which commenced in 2016.



We
had no investment activities during the years ended December 31, 2016, 2015 and 2014, other than investment in short-term deposits.



On
January 13, 2017, we announced the acquisition of a majority ownership interest in TyrNovo from its majority shareholder, for
consideration of $2 million in cash and $1.8 million worth of Kitov Parent’s ordinary shares based on the closing price
of Kitov Parent’s ordinary shares on the TASE on January 11, 2017, or 11,292,508 ordinary shares.



Financing
activities



For
the year ended December 31, 2016, financing activities consisted of net proceeds from issuance of Class A units, each consisting
of one ADS and a public warrant, and Class B units, each consisting of a pre-funded warrant, and a public warrant, on NASDAQ of
approximately $12.0 million, compared to the issuance of ADSs and public warrants on NASDAQ of $10.6 million and the issuance
of shares and TASE listed warrants on the TASE of $2.0 million, the repayment of loans received from related parties of $294,000,
and the payment of interest of $145,000 for the year ended December 31, 2015. The proceeds from the share issuances in 2015 and
2016 were used to finance the activities related to the Phase III clinical trial for KIT-302 and the formulation of prototypes
of KIT-302, as well as the acquisition of Kitov Parent’s controlling stake in TyrNovo in January 2017.



As
of December 31, 2016 Kitov Parent had no borrowings.



As
of December 31, 2016, and as of the date of this Annual Report on Form 20-F, we had no commitments for capital expenditures.



|C. | Research and Development, Patents and Licenses
|-- | ----------------------------------------------



Our
research and development expenses consist primarily of costs of clinical trials, salaries, and consulting fees (including share-based
payments), and fees paid to external service providers. We primarily use external service providers to manufacture our therapeutic
candidates and to perform clinical trials with our therapeutic candidates. 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 our therapeutic candidates.





73






From
the commencement of the pharmaceutical research and development activities of Kitov Pharmaceuticals through December 31, 2016,
Kitov has incurred research and development expenses of approximately $10.4 million. Set forth below is a summary of the research
and development costs for the years ended December 31, 2016, 2015 and 2014. Virtually all of the costs were incurred in connection
with the development of KIT-302.



|                           |  | Year Ended December 31      |      
|-------------------------- |  | --------------------------- | -----
|                           |  | 2016                        |      
|                           |  | (U.S. dollars in thousands) |      
|Total direct project costs |  |                             | 4,180



In
addition to the major cost of clinical trials and CMC development, research and development expenses include consulting expenses
for regulatory and project management work required for development of our therapeutic candidate portfolio. Set forth below is
a summary of our research and development expenses based on the type of expenditure.



|                                 |  | Year Ended December 31      |      
|-------------------------------- |  | --------------------------- | -----
|                                 |  | 2016                        |      
|                                 |  | (U.S. dollars in thousands) |      
|Payroll expenses - related party |  |                             | 652  
|Sub-contractors                  |  |                             | 3,528
|                                 |  |                             |      
|                                 |  |                             | 4,180



In
April 2014, Kitov entered into an agreement with Dexcel for the development of the drug formulation for KIT-302 and its manufacture
in quantities sufficient to support the filing of an NDA with the FDA (see “Item 10. Additional Information– C. Material
Contracts – Development Services Agreement with Dexcel”). We therefore began incurring costs in 2014 for the development
of the drug formulation for KIT-302.



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 our therapeutic candidates for potential commercialization. We estimate a total
cost of approximately $1.3 million of research and development expenses related to the renal function clinical trial for KIT-302
and $2.8 million for pre-clinical trials related to TyrNovo’s NT219.



While
we are currently focused on advancing our therapeutic candidates including NT219, our future research and development expenses
will depend on the success of the preclinical and clinical trials for each therapeutic candidate, as well as available resources
and the ongoing assessments of each therapeutic candidate’s commercial potential. In addition, we cannot forecast with any
degree of certainty which therapeutic candidates may be subject to future commercialization arrangements, when such commercialization
arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
See “Item 3. Key Information – D. Risk Factors – If we and/or our potential commercialization partners are unable
to obtain FDA or other foreign regulatory authority approval for our therapeutic candidates, we and/or our potential commercialization
partners will be unable to commercialize our therapeutic candidates.”



As
we obtain results from preclinical and/or clinical trials, we may elect to discontinue or delay development and preclinical and/or
clinical trials for certain therapeutic candidates in order to focus our resources on more promising therapeutic candidates or
projects. Completion of preclinical and/or clinical trials by us or our licensees may take several years or more, but the length
of time generally varies according to the type, complexity, novelty and intended use of a therapeutic candidate. See “Item
3. Key Information – D. Risk Factors – Risks Related to Our Business and Regulatory Matters.”





74






We
expect our research and development expenses to increase from current levels as we continue the advancement of our preclinical
and/or clinical trials and therapeutic candidates’ development, including the development of NT219. The lengthy process
of completing CMC and/or preclinical and/or clinical trials and seeking regulatory approvals for our therapeutic candidates requires
substantial expenditures. Any failure or delay in completing preclinical and/or clinical trials, 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. Due to the factors set forth above, we are not able to estimate with any certainty
if and when we would recognize any net revenues from our therapeutic candidates.



|D. | Trend
    Information
|-- | ---------------------



We
are a biopharmaceutical company which focuses its activities on the development of our therapeutic candidates. It is not possible
for us to predict with any degree of accuracy the outcome of our research and development or commercialization efforts with regard
to any of our therapeutic candidates. Our research and development expenditure is our primary expenditure, although we may incur
substantial expenditure should we acquire any new therapeutic candidates. Increases or decreases in research and development expenditure
are primarily attributable to the level and results of our CMC, preclinical and clinical trial activities and the amount of expenditure
on those trials.



|E. | Off-Balance
    Sheet Arrangements
|-- | ----------------------------------



We
are not party to any transactions, agreements or other contractual arrangements with unconsolidated entities whereby we have financial
guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material
continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that
provides us with financing, liquidity, market risk or credit risk support.



|F. | Tabular
    Disclosure of Contractual Obligations
|-- | -------------------------------------------------



The
following table summarizes Kitov’s significant contractual obligations as of December 31, 2016.



|                                         |  | Total                                   |       |  | Less than 1 year |  |       | 1-3 years |  |  | 3-5 years |  |  | More than 5 years |   
|---------------------------------------- |  | --------------------------------------- | ----- |  | ---------------- |  | ----- | --------- |  |  | --------- |  |  | ----------------- | --
|                                         |  | (U.S. dollars in thousands) (unaudited) |      
|                                         |  |                                         |       |  |                  |  |       |           |  |  |           |  |  |                   |   
|Office lease obligations                 |  |                                         | 265   |  |                  |  | 70    |           |  |  | 130       |  |  |                   | 65
|Obligations to R&D service providers (1) |  |                                         | 1,700 |  |                  |  | 1,700 |           |  |  |           |  |  |                   |   
|                                         |  |                                         |       |  |                  |  |       |           |  |  |           |  |  |                   |   
|Total                                    |  |                                         | 1,965 |  |                  |  | 1,770 |           |  |  | 130       |  |  |                   | 65



| | (1) | Reflects
    payments payable to Java Clinical Research and its sub-contractors, DABL Limited, and other service providers upon achievement
    of various performance milestones in accordance with current time estimates, pursuant to our service agreements with them.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Kitov
had no material capital expenditures for the years ended December 31, 2016, 2015 and 2014.





75






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



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



The
following table sets forth the name, age and position of each of our executive officers, directors (and director nominees), as
well as our senior employees, as of the date of this Annual Report on Form 20-F. The inclusion of any individual in this table
does not necessarily imply that such individual is an officer or office holder as such terms are defined under applicable law.



|Name                                   |  | Age |  | Position                                                        
|-------------------------------------- |  | --- |  | ----------------------------------------------------------------
|John
    Paul Waymack, M.D., Sc.D.(3)  |  | 65  |  | Chairman
    of the Board of Directors and Chief Medical Officer
|Isaac
    Israel                       |  | 38  |  | Chief
    Executive Officer and Director                        
|Simcha
    Rock, CPA, MBA(4)(5)        |  | 67  |  | Chief
    Financial Officer and Director                        
|Steven
    Steinberg(1)(2)             |  | 56  |  | Independent
    Director                                        
|Ido
    Agmon, MBA(2)(3)(4)            |  | 40  |  | Independent
    Director                                        
|Arye
    Weber(1)(2)(4)                |  | 68  |  | Independent
    Director                                        
|Ran
    Tzror, CPA, MBA(4)(5)          |  | 36  |  | Independent
    Director                                        
|Revital
    Stern-Raff, CPA, MBA(1)    |  | 43  |  | Independent
    Director                                        
|Gil
    Ben-Menachem, Ph.D., MBA(3)(5) |  | 49  |  | Vice
    President of Business Development                      
|Avraham
    Ben-Tzvi, Adv.             |  | 46  |  | Group
    Chief Legal Officer                                   
|Hadas
    Reuveni, Ph.D.               |  | 50  |  | Founder
    and Chief Technology Officer of TyrNovo             



|(1) | Member of Kitov Parent audit committee                 
|--- | -------------------------------------------------------
|(2) | Member of Kitov Parent compensation committee          
|(3) | Member of Kitov Parent science and technology committee
|(4) | Member of Kitov Parent investment committee            
|(5) | Director of TyrNovo                                    





John
Paul Waymack, M.D., Sc.D. was one of the founders of Kitov Pharmaceuticals and has served as the chairman of Kitov Parent’s
board of directors and has been responsible for the medical operations of the Company as chief medical officer since July 2013.
Dr. Waymack has over 20 years of experience in the biopharma field. Dr. Waymack is a former academic transplant surgeon and a
former FDA medical officer, with over twenty years of experience in drug development as a consultant to major pharmaceutical companies,
including Pfizer, Roche, Pharmacia, Warner Lambert and Searle. During his 10 years of academic career, Dr. Waymack published over
100 scientific essays, mainly in the fields of prostaglandins and immunology. In addition, Dr. Waymack volunteered to the U.S.
Army, where he was commissioned and served as a Major in the Medical Corp. in the position of chief of surgical studies in the
U.S. Army’s Institute for Surgical Research. Dr. Waymack was also an associate professor of surgery at the University of
Texas Medical Branch and at the University of Medicine and Dentistry of New Jersey. Dr. Waymack serves as a member of other boards
of various healthcare corporations, both board of directors and boards of advisors, both public and private. This includes serving
of the board of advisors for the publicly traded Moleculin Corporation.



Isaac
Israel has served as Kitov Parent’s chief executive officer and a member of the board since October 2012. Mr. Israel
was the founding chief executive officer of BeeContact Ltd. (formerly TASE:BCNT), from 2001 until 2007. Since 2008 Mr. Israel
has served as founding chief executive officer of Uneri Capital Ltd., a consulting firm in the capital markets field, owned by
Mr. Israel, which specializes in the healthcare sector. In providing such consulting services, Mr. Israel also serves as a member
of the board of directors of various healthcare corporations, both private and public, including as chairman of the board of NextGen
Biomed Ltd., which is traded on the TASE. Since 2011 Mr. Israel has also provided various consulting services to Capital Point
Ltd. (TASE:CPTP).



Simcha
Rock, CPA, MBA, has served as Kitov Parent’s chief financial officer and a member of the board since July 2013. Mr.
Rock was a private equity manager at Edmond de Rothschild Private Equity Management, a firm specializing in the management of
venture capital and other private equity investments funds, from February 2000 until January 2011, with responsibility for all
financial, legal and administrative matters for several investment funds. Prior to 2000, Mr. Rock held financial management positions
at Intel Electronics Ltd., The Jerusalem College of Technology, and JC Technologies Ltd. Mr. Rock holds a BA from Yeshiva University
and an MBA from Cleveland State University.





76






Steven
Steinberg, has served as a member of Kitov Parent’s board since July 13, 2016. Since January 2015, Mr. Steinberg has
been the chief financial officer of Glide Talk Ltd., a technology company in the video messaging arena. From September 2013 to
October 2014 he served as vice president, finance at ClientConnect Ltd., a subsidiary of Conduit Ltd., and subsequent to an acquisition,
of Perion Network Ltd. a NASADQ listed company. Between August 2011 and August 2013, Mr. Steinberg acted as an independent consultant,
providing start-ups and as well as mature organizations with advice in financial reporting, due diligence and business models.
From December 2002 until July 2011 Mr. Steinberg was employed by Answers Corporation, a NASDAQ listed company, where he served
as chief financial officer. Prior to 2002 he held a number of finance and chief financial officer roles, following a ten year
period of service as an audit manager at Coopers & Lybrand (currently Price Waterhouse Coopers) in New York City. Mr. Steinberg
holds a Bachelor’s Degree in Business Administration from Florida International University – School of Business Administration,
and was granted a CPA license in New York State.



Ido
Agmon, MBA, has served as a member of Kitov Parent’s board since June 26, 2016. Since 2014, Mr. Agmon has been a manager
of Aviv New-Tech (formerly Aviv Bio-Invest), a private investment fund which manages a portfolio of public Israeli & global
biomed and technology companies, of which he is a co-founder, and where he is responsible for analysis and evaluation of investments
in Israeli and global biomed companies. Since 2012, Mr. Agmon also has been acting as an independent consultant, providing start-ups
and technology-based ventures with advice in strategic planning and fund-raising. From 2009 until 2011, Mr. Agmon served as the
CEO of Meytav Technology Incubator, an Israeli-based accelerator for biotech, pharma & medtech ventures with over 20 portfolio
companies. Mr. Agmon has served as a board member at a number of biomed ventures. From 2007 until 2009, he worked as the Director
of Business Development in ATI incubator, a technology incubator specializing in biomed and cleantech projects, responsible for
deal-flow and project evaluation. Mr. Agmon holds a Bachelor’s Degree in Business Administration & Life Sciences from
Tel Aviv University, Tel Aviv, Israel, and an MBA from The Hebrew University, Jerusalem, Israel.



Arye
Weber, has served as a member of Kitov Parent’s board since January 23,
2017. Since 2001, Mr. Weber has been the chairman of the board and sole shareholder of Scorpio
Investments Ltd., a private holding company for various investments. Between 2006 and 2009, Mr. Weber was the CEO of Alonei Meitar
Ltd. a TASE listed real estate development company. Between 2004 and 2008, Mr. Weber was the chairman of the board of Inventec
Investments Ltd., a TASE listed real estate development company. Between 1989 and 2002, Mr. Weber was the Manager of the Securities
& Investments sector at United Mizrachi Bank, and prior to 1989 he served in various securities and investments department
roles at such bank. Mr. Weber has been an external director at Capital Point Ltd., a TASE listed biotech investment company, since
2013, a director at Lapidoth Israel Oil Prospectors Corp. Ltd., a TASE listed oil and gas exploration partnership, since 2012,
and a director at Sunny Communications Ltd. (formerly Scailex), a TASE listed investments company, since 2014. Mr. Weber also
serves as a member of the board of directors of various privately held corporations. In the past, Mr. Weber held director positions,
including, at the Tel Aviv Stock Exchange Clearing House (chairman), Bank Mizrachi Registration Company (chairman), Mashabim United
Mizrachi Bank Offerings Company Ltd., Tel Aviv Stock Exchange Ltd., Maalot Israel Rating Agency, and Excellence Investment Management
Company. Mr. Weber completed various courses in investments at the Tel Aviv University, and holds an M.A. in Economics and Business
Studies from the University of Kharkov, U.S.S.R. (presently Ukraine).



Ran
Tzror, CPA, MBA has served as a member of Kitov Parent’s board since March 27, 2017. Since
2014, Mr. Tzror has been the director of S.Y Glilot Ltd., a real-estate company owned by his family. Between 2010 and 2014 he
was employed by Teva Pharmaceuticals Industries Ltd. (NYSE:TEVA; TASE:TEVA) in various roles in corporate business development,
the office of the CEO & President of Teva Pharmaceuticals, and as Director of the Corporate Post Merger Integration Office.
Between 2007 and 2010 he was a senior associate at Somekh Chaikin Certified Public Accountants (Israel), a member firm of KPMG
International. Between 2006 and 2007 he was a legal intern at the commercial division of Yigal Arnon & Co., Advocates &
Notary. Mr. Tzror holds a B.A. in Accounting, Ll.B. in Law, and MBA in Financial Management from Tel-Aviv University. He also
completed various courses at the Kellogg Graduate School of Management at Northwestern University in Illinois. Mr. Tzror was granted
a CPA license in the State of Israel, and was also admitted as a member of the Israeli Bar Association.



Revital
Stern-Raff, CPA, MBA has served as a member of Kitov Parent’s board since March 2, 2017. Since 2013, Ms. Stern-Raff,
has been the Chief Financial Officer of several municipal development and community association units of the City of Giv’atayim,
Israel. Between 2006 and 2013, Ms. Stern-Raff held comptroller and economist positions at Ilex Medical Ltd., a publicly-traded
medical diagnostic equipment company (TASE:ILX). Prior to 2006, Ms. Stern-Raff held a number of comptroller and public accounting
positions. Between 2009 and 2012, Ms. Stern-Raff was an independent director at Real Imaging Holdings Ltd., a publicly traded
breast cancer diagnostics company (TASE:RIMG). Ms. Stern-Raff is a licensed CPA in Israel, and holds an M.B.A. (Finance) and B.A.
(Business Administration – Information Technology and Finance) from the Rishon Letzion College of Management in Israel.





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Gil
Ben-Menachem, Ph.D., MBA has served as our vice president business development since January 2016. He has over 15 years of
experience in the pharmaceutical, biotechnology, and venture capital industries. He was most recently head of innovative products
at Dexcel Pharma, the second largest Israeli pharmaceutical company. Dr. Ben-Menachem previously served as director of business
development at Teva Pharmaceutical Industries, where he was responsible for business development efforts in connection with partnering
and acquisition deals for late stage innovative drug candidates. Prior positions held by Dr. Ben-Menachem include serving as chief
executive officer of OphthaliX, a company that developed drugs in the ophthalmology space, and serving as director of business
development at Paramount Biosciences, a New York based merchant bank and biotechnology venture capital firm. Dr. Ben-Menachem
received his Ph.D. from the Hebrew University, and MBA from the University of Maryland. He concluded his postdoctoral training
in immunology and microbiology at the NIH.



Avraham
Ben-Tzvi, Adv.,the Group’s chief legal officer, has served as the Kitov general counsel since November 2015 and was
appointed as the Kitov company secretary in December 2015. Mr. Ben-Tzvi previously served as general counsel and company secretary
at Medigus Ltd., a publicly traded minimally invasive endosurgical toolsmedical
device and miniaturized imaging equipmentcompany (NASDAQ/TASE:MDGS),from April 2014 until November 2015. Prior to that he served as an attorney at Yigal Arnon & Co. from 2009 to 2014
where, among other corporate and commercial work, he advised companies and underwriters on various offerings by Israeli companies
listing in the U.S. and/or Israel and on various SEC and Israeli related securities law filings. Prior to 2009, Mr. Ben-Tzvi worked
in a number of business development, corporate finance and banking roles at companies in the financial services, manufacturing
and software development industries. Mr. Ben-Tzvi holds a BA in Economics from Yeshiva University in New York and an Ll.B from
Sha’arei Mishpat College of Law in Hod Hasharon, Israel.



Dr.
Hadas Reuveni, Ph.D. is the founder and Chief Technology Officer of TyrNovo. Dr. Reuveni, a co-inventor of the TyrNovo technology,
received her Ph.D., Summa Cum Laude, for anti-cancer drug discovery from the Hebrew University of Jerusalem. She has been engaged
with the scientific projects in TyrNovo’s portfolio since 2005 and has nearly two decades of research and development experience
in biotechnology. Dr. Reuveni founded NovoTyr Ltd. a biotech start-up company which a predecessor company to TyrNovo, developing
small molecules for the treatment of cancer and neurodegenerative diseases, and where between 2005 and 2012 she served as the
CEO. She also founded and served as a director and chief science officer of AngioB Ltd., a start-up company that developed GPCR-based
agents for multiple indications (2006-2010). Prior to these roles, she was the director of research & development at Keryx
Biopharmaceuticals (NASDAQ:KRX) on 2001-2004. Dr. Reuveni has served as a scientific consultant for Integra Holdings Ltd., Campus
Bio Management Ltd. and BioLineRX (NASDAQ/TASE BLRX).



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



Director
Compensation



We
currently pay Kitov Parent’s independent directors an annual fee of NIS 24,735 (approximately $6,440) and a fee of NIS 1,
431 (approximately $373) per meeting (or a smaller amount in case they do not physically attend the meeting). During the year
ended December 31, 2016, we paid Kitov Parent’s independent directors NIS 202,894 (approximately $53,500) in the aggregate.



Directors’
Service Contracts



There
are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the
other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries,
except as provided in certain employment or service agreements with our executive officers who also serve as directors.





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Executive
Compensation



For
so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic
companies, including the requirement applicable to emerging growth companies to disclose the compensation of our chief executive
officer and other two most highly compensated executive officers on an individual, rather than an aggregate, basis. In addition,
a recent amendment to the Israeli proxy regulations governing Israeli public companies, which were promulgated under the Israeli
Companies Law, requires us to disclose in the notice and proxy statement for our annual general meeting of our shareholders (or
to include a reference therein to other previously furnished public disclosure) the annual compensation of our five most highly
compensated office holders on an individual basis, rather than on an aggregate basis, as was previously permitted for Israeli
public companies listed overseas. This disclosure may not be as extensive as that required of a U.S. domestic issuer.



Under
the Companies Law and Regulations, the compensation of Kitov Parent’s directors with respect their service as a director,
as well as their engagement in other roles (if the director is so engaged) as well as Kitov Parent’s chief executive officer
generally requires the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted
under the regulations promulgated under the Companies Law, the approval of the shareholders at a general meeting. In addition
the Companies Law and Regulations requires the compensation of a public company’s executive officers (other than the chief
executive officer) who are not directors at the company to be approved by, first, the compensation committee, second, by the company’s
board of directors and third, if such compensation arrangement is inconsistent with the company’s duly approved compensation
policy, or compensation is approved prior to the approval of a new compensation policy upon expiration of the term of the previous
compensation policy, or is to an executive officer who is a controlling shareholder (or certain relatives or affiliates thereof),
also by the company’s shareholders. As such, the individual compensation to our directors and members of our management
bodies may not necessarily be disclosed or brought for prior approval by the shareholders on an individual basis. For more information
on the corporate approvals for officer compensation please see Item 6.C – Board Practices – “Compensation of
Directors and Executive Officers”



The
aggregate compensation paid, and benefits in-kind granted to or accrued on behalf of all of Kitov’s directors and senior
management for their services, in all capacities, to us during the year ended December 31, 2016, was approximately $2.1 million.
As of December 31, 2016, the total amount set aside as an actuarial estimate by us to provide
post-employment benefits for certain office holders was in the aggregate amount of approximately $0.2 million. We have not set
aside amounts to provide post-employment benefits for the remaining office holders.



We
have entered into engagement agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition
provisions may be limited under applicable laws.



Our
directors and executive officers hold exemption and indemnification letters and a valid D&O insurance policy. For information
on exemption and indemnification letters granted to our officers and directors, please see “Item 6. Directors, Senior Management
and Employees - C. Board Practices - Exculpation, Insurance and Indemnification of Directors and Officers”.





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Below
is a breakdown of the annual compensation of each of Kitov’s executive officers for the year ended December 31, 2016, with
respect to whom, as of the date of this Annual Report on Form 20-F, disclosure is either required in our home country, or whose
compensation by us has otherwise previously been disclosed publicly on an individual basis:



|Name                |  | Position                             |  | Salary or other payments1in
                                                                                                                                                                                                                                                                                                                                                                                                                                                 (in $ thousands) |     |  | Bonus payments or accruals
 (in $ thousands) |  |     | Share-based payment
                                                                                                                                                                                                                                                                     
(in $ thousands)2 |  |  | Total (in $ thousands) | 
|------------------- |  | ------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- |  | -------------------------------------------- |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------------------- | 
|Dr. J. Paul Waymack |  | Chairman of the Board                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 254 |  |                                              |  | 240 |                                                                                                                                                                                                                                                                                                             |  |  | 158                    | 
|Isaac Israel        |  | Chief Executive Officer and Director |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 238 |  |                                              |  | 331 |                                                                                                                                                                                                                                                                                                             |  |  | 66                     | 
|Simcha Rock         |  | Chief Financial Officer and Director |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 157 |  |                                              |  | 224 |                                                                                                                                                                                                                                                                                                             |  |  | 20                     | 



1Includes social benefits, such as payments to the National Insurance Institute, advanced education funds, managers’
insurance and pension funds; vacation pay; and recuperation pay as mandated by Israeli law, and car lease or vehicle use reimbursement
related benefits.



2Share based payments are measured at the fair value of the service, when available. The fair value of the Company’s
share options granted to employees, directors and service providers, where fair value of service was not measurable, was estimated
using the fair value of Kitov Parent’s traded warrants with similar terms, making some adjustments to reflect the specific
terms of the options based on the expected duration.



Consulting
Agreement with Waymack Inc. (wholly owned by Dr. John Paul Waymack)



In
July 2013, we entered into a consulting agreement with Waymack Inc. for the services of Dr. John Paul Waymack, one of our founders,
pursuant to which Dr. Waymack provides services to us as the chairman of our board of directors, and is responsible for the medical
operations of the Company as chief medical officer in which capacity he reports to our board of directors. In return for Dr. Waymack’s
services, as of March 2014 we paid Waymack Inc. a monthly fee of NIS 29,880 (approximately $8,690 per month based on the representative
rate of exchange on June 30, 2014). Between September 2014 and December 2015, we paid Waymack Inc. a monthly fee of $14,000. Effective
January 1, 2016, we are paying Waymack Inc. a monthly fee of $20,000. The service agreement may be terminated by either party
upon 180 days’ advance notice to the other party. In addition to the above monthly fee Waymack Inc. is entitled to the following
additional compensation:



Retirement
Grant. A retirement grant of six (6) times the monthly fee upon termination of Dr. Waymack’s engagement with us, provided
that the termination is not due to circumstances that do not entitle an employee to severance payments under any applicable law
and/or under any judicial decision of a competent tribunal.



Annual
Bonus. Annual bonus, which shall not exceed twelve (12) times the monthly fee, of which at least 80% is based on measurable
criteria and either (i) up to 20% or (ii) up to three (3) times the monthly fee is based on non-measurable criteria under our
compensation policy. Below is a description of the annual bonus based on measurable criteria:



(i)
a bonus in the amount of one (1) time the monthly fee for each NIS 5 million (gross) increase during the calendar year compared
to the previous calendar year-end of our equity and/or asset value, taking into consideration and offsetting any relevant decrease
in our equity and/or asset value which occurred in the 12 months previous to such increase; (ii) a bonus in the amount of one
(1) time the monthly fee for each NIS 5 million (gross) increase in income from sales of our products in the calendar year compared
to the previous calendar year; (iii) a bonus in the amount of three (3) times the monthly fee for completion of in-licensing transaction
for a new product, provided however that in any event the bonus will not be paid prior to the clinical trial phase and
IND approval with respect to the new product; (iv) a bonus in the amount of one (1) time the monthly fee for each NIS 10 million
increase in our market value during the calendar year compared to the previous calendar year-end; (v) a bonus in the amount of
six (6) times the monthly fee for each target successfully achieved in a clinical trial as of Phase II of the trial and a bonus
in the amount of one (1) time the monthly fee for each target successfully achieved in a clinical trial as of Phase I; (vi) a
bonus in the amount of six (6) times the monthly fee upon approval by the FDA (NDA approval) or any comparable regulatory authority
in connection with our products provided however that such bonus shall not be paid for each product more than once; and (vii)
a bonus in the amount of two (2) times the monthly fee after completion of registration of our securities on a U.S. stock exchange.



Special
bonus based on either a Merger Transaction or a Commercialization Transaction. A special bonus equal to:



(i)
4% of our valuation determined in a Merger Transaction; provided that: (a) in the event that a commission is paid to third parties,
the total bonus paid to Waymack Inc., any other office holders, and any third parties with respect thereto will not exceed 8%
of the valuation, and the bonus paid to each such office holder shall be calculated pro rata; (b) in any event Waymack Inc. will
not be entitled to a bonus based on a Merger Transaction in an amount exceeding $500,000; A “Merger Transaction” means
one or more related transactions of either: (A) sale, lease, license or any transfer of all or most of our assets or securities;
(B) merger so that the shareholders holding at least 50% of our issued and outstanding share capital prior to the consummation
of such transaction hold less than 50% of our issued and outstanding share capital or the share capital of the surviving company
following the consummation of such transaction, provided however that our valuation in such Merger Transaction is at least $25
million;





80






(ii)
4% of the cumulative revenues actually received from a Commercialization Transaction, less any payments made to third parties.
The initial bonus is payable upon the receipt of at least $5 million as a result of the commercialization of our products. In
the event we receive additional revenues as a result of a Commercialization Transaction exceeding such amount, Waymack Inc. will
be entitled to an additional monthly bonus against revenues received by us as a result of the Commercialization Transaction in
the prior month; provided that: (a) in the event that a commission is paid to third parties, the total bonus paid to Waymack Inc.
and any other office holders, and any third parties with respect thereto will not exceed 10% of the total revenues, and the bonus
paid to each such office holder shall be calculated pro rata; (b) in any event Waymack Inc. will not be entitled to a bonus based
on a Commercialization Transaction in an amount exceeding $500,000. A “Commercialization Transaction” means the execution
of a licensing and/or distribution agreement of our products with revenues of at least $5 million. Waymack Inc. will be entitled
to the bonus as a result of a Commercialization Transaction only upon our receipt of at least $5 million as a result of the commercialization
of our products.



In
the event our cash balance decreases below NIS 2 million, we may, by a resolution of the compensation committee (or the audit
committee acting in lieu of a compensation committee pursuant to the Companies Law) and the board of directors, decrease and/or
choose not to grant the annual bonus and/or the special bonus, provided that such resolution was made with respect to all of our
office holders. Upon the increase of our cash balance above such amount, we shall grant the foregone annual bonus and/or the special
bonus, as applicable.



In
the event of the reference of our auditors in the auditors’ opinion on our financial statements with respect to significant
doubt as to our ability to continue as a “going concern,” we may, by a resolution of the compensation committee (or
the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and the board of directors, decrease
and/or choose not to grant the special bonus, provided that such resolution was made with respect to all of our office holders.
However, upon the removal of the auditors’ “going concern” reference, we may grant the special bonus with respect
to a past merger transaction.



In
the second quarter of 2016, each of our audit committee, board of directors and shareholders approved a grant of options under
our 2016 Equity-Based Incentive Plan to Dr. Waymack for the purchase of 3,089,066 ordinary shares (the “Initial PW Grant”)
(such number of ordinary shares would comprise 154,453.3 of our ADSs). Such options will vest over a period of 3 years from June
27, 2016; have an exercise price of NIS 0.7884 per ordinary share; and are exercisable for 8 years from June 27, 2016, provided,
however, that no options are exercisable prior to our adoption of a revised compensation policy in accordance with the Companies
Law. In addition Dr. Waymack was granted an additional 2,468,759 options following our July 2016 follow-on public offering, on
the same terms and conditions of the Initial PW Grant so that the sum total of his options following such public offering reflected
3.5% of our issued and outstanding shares subsequent to the offering(the “Subsequent PW Grant”); this grant was made
subject to the proviso that the economic value of the total options issued to Dr. Waymack, calculated as of the date of issuance
of the Subsequent PW Grant, was not in excess of the economic value of the Initial PW Grant as of the date of the approval of
our board of directors for the option grants to Dr. Waymack.



Employment
Agreement with Mr. Isaac Israel (previously Service Agreement with Uneri Capital Ltd.)



In
July 2013, we entered into a services agreement with Uneri Capital Ltd., a private company wholly owned by Mr. Isaac Israel, for
the provision of part-time management services according to our needs. For such services we paid as of such date monthly payments
of NIS 25,000 (approximately $7,300 per month based on the representative rate of exchange on June 30, 2014).





81






As
of September 2014 we terminated the engagement with Uneri Capital and entered into an employment agreement with Mr. Isaac Israel
as our chief executive officer pursuant to which we paid Mr. Israel a base salary of NIS 40,000 (approximately $10,593) per month.
In addition to the above we provided Mr. Israel with a car allowance at a monthly cost of up to NIS 4,000 (approximately $1,059),
management insurance policy and advanced study fund.



Effective
as of May 1, 2016, Mr. Israel increase the scope of his engagement with the Company to 100% from 80% and his base monthly consideration
and linked benefits were increased proportionally. In addition as of May 1, 2016, Mr. Israel is engaged via a services agreement
with Uneri Capital, provided, however, that there is no difference to our costs and expenses for such engagement as a service
provider instead of as an employee. For such services we pay Uneri Capital as of such date monthly payments of NIS 68,867 (approximately
$17,911) per month.



In
addition, Mr. Israel is entitled to the following additional compensation:



Retirement
Grant. A retirement grant of three (3) time the monthly salary equivalent (currently NIS 50,000 (approximately $13,004) per
month) upon termination of Mr. Israel’s engagement with us, provided that the termination is not due to circumstances that
do not entitle an employee to severance payments under any applicable law and/or under any judicial decision of a competent tribunal.



Annual
Bonus. Annual bonus, which shall not exceed twelve (12) times the monthly salary equivalent three (3) time the monthly salary
equivalent (currently NIS 50,000 (approximately $13,004) per month) of which at least 80% is based on measurable criteria and
either (i) up to 20% or (ii) up to three (3) times the monthly salary is based on non-measurable criteria under our compensation
policy. The annual bonus based on measurable criteria is payable for the same events and in the same amounts as the agreement
with Waymack Inc. described above, except that the bonus to Mr. Israel for each target successfully achieved in a clinical trial
as of Phase I is two (2) times his monthly salary.



Special
bonus based on either a Merger Transaction, Fund Raise or a Commercialization Transaction. A special bonus equal to: (i) 4%
of our valuation determined in a Merger Transaction payable in the same manner as the agreement with Waymack Inc. described above;
(ii) NIS 200,000 for each Fund Raise, provided however, in the event that a commission is paid to third parties, the total bonus
paid to Mr. Israel, any other office holders and any third parties with respect thereto will not exceed 10% of the Fund Raise
amount (gross); and (iii) 4% of the cumulative revenues actually received from a Commercialization Transaction, less any payments
made to third parties, payable in the same manner as the agreement with Waymack Inc. described above. A “Fund Raise”
means a raise by us of each NIS 10 Million (cumulative), in any calendar year, commencing as of October 1, 2014.



We
may, by a resolution of the compensation committee (or the audit committee acting in lieu of a compensation committee pursuant
to the Companies Law) and the board of directors, decrease and/or choose not to grant the annual bonus and/or the special bonus,
in the manner described above regarding the Service Agreement with Waymack Inc.



In
the second quarter of 2016, each of our audit committee, board of directors and our shareholders approved a grant of options under
our 2016 Equity-Based Incentive Plan to Mr. Israel for the purchase of 2,206,476 ordinary shares (such number of ordinary shares
would comprise 110,323.8 of our ADSs). Such options will vest over a period of 3 years from June 27, 2016, have an exercise price
of NIS 0.7884 per ordinary share, and are exercisable for 8 years from June 27, 2016, provided, however, that no options are exercisable
prior to our adoption a revised compensation policy in accordance with the Companies Law.



Consulting
Agreement with Mr. Simcha Rock



In
July 2013, we entered into a consulting agreement with Mr. Rock pursuant to which Mr. Rock provides services to us as our chief
financial officer. In return for Mr. Rock’s services, as of March 2014, we paid Mr. Rock a monthly fee of NIS 35,000 (approximately
$10,200 per month based on the representative rate of exchange on June 30, 2014). As of September 2014, we are paying Mr. Rock
NIS 50,000 (approximately $13,242) per month. The agreement may be terminated by either party upon 90 days’ prior notice
to the other party.





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In
addition to the above monthly fee Mr. Rock is, as of September 1, 2014, entitled to a leased company car at a monthly cost of
up to NIS 3,000 (approximately $795) and to the following additional compensation:



Retirement
Grant. A retirement grant of three (3) times the monthly fee upon termination of Mr. Rock’s engagement with us, provided
that the termination is not due to circumstances that do not entitle an employee to severance payments under any applicable law
and/or under any judicial decision of a competent tribunal.



Annual
Bonus. Annual bonus, which shall not exceed twelve (12) times the monthly salary equivalent (NIS 38,462 (currently approximately
$10,000) per month, of which at least 80% is based on measurable criteria and either (i) up to 20% or (ii) up to three (3) times
the monthly fee is based on non-measurable criteria under our compensation policy. The annual bonus based on measurable criteria
is payable for the same events and in the same amounts as the agreement with Waymack Inc. described above, except that the bonus
to Mr. Rock for meeting the targets of our clinical trials in a clinical trial as of Phase II is four (4) times his monthly fee
and after completion of registration of our securities on a U.S. stock exchange the bonus to Mr. Rock shall be four (4) times
the monthly fee and the measurable criteria for Mr. Rock includes a bonus in the amount of three (3) times the monthly fee for
meeting our budget objectives.



Special
bonus based on either a Merger Transaction, Fund Raise or a Commercialization Transaction. A special bonus equal to: (i) 4%
of our valuation determined in a Merger Transaction payable in the same manner as the agreement with Waymack Inc. described above,
provided that the bonus payable to Mr. Rock based on a Merger Transaction will not exceed $350,000; (ii) NIS 100,000 for each
Fund Raise, provided however, in the event that a commission is paid to third parties, the total bonus paid to Mr. Rock, any other
office holders and any third parties with respect thereto will not exceed 10% of the Fund Raise amount (gross); and (iii) 4% of
the cumulative revenues actually received from a Commercialization Transaction, less any payments made to third parties, payable
in the same manner as the agreement with Waymack Inc. described above, provided that the bonus payable to Mr. Rock based on a
Commercialization Transaction will not exceed $350,000.



We
may, by a resolution of the compensation committee (or the audit committee acting in lieu of a compensation committee pursuant
to the Companies Law) and the board of directors, decrease and/or choose not to grant the annual bonus and/or the special bonus,
in the manner described above regarding the Service Agreement with Waymack Inc.



In
addition, in July 2014 we granted Mr. Rock 1,188,967 non-tradable options under our 2013 Option Plan to purchase 91,455 ordinary
shares. Of these options: (a) 1,011,500 options to purchase 77,805 ordinary shares will vest pro rata on a monthly basis over
a period of 18 months from the date of grant and will be exercisable at an exercise price of NIS 10.40 (approximately $2.75) per
ordinary share for a period of three years commencing from the date of grant of the options; and (b) 177,467 options to purchase
13,651 ordinary shares vested as of the date of the grant and are exercisable at an exercise price of NIS 10.40 (approximately
$2.75) per ordinary share and will have a term of three years from the date of grant. Following the attainment of the Milestone
under the Share Transfer Agreement in connection with our Phase III trial for KIT-302, we were required to grant to Mr. Rock an
additional 181,089 options to purchase 13,929 ordinary shares. See “Business – Share Transfer Agreement with Kitov
Pharmaceuticals”. These options will vest as of the date of grant and will be exercisable at an exercise price of NIS 10.40
(approximately $2.75) per ordinary share and will have a term of three years from the date of grant. Mr. Rock has waived the receipt
of this option grant. See “Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions
– Share Transfer Agreement with Kitov Pharmaceuticals”.



In
the second quarter of 2016, each of our audit committee, board of directors and our shareholders approved a grant of options under
our 2016 Equity-Based Incentive Plan to Mr. Rock for the purchase 661,943 ordinary shares, (such number of ordinary shares would
comprise 33,097.15 of our ADSs). Such options will vest over a period of 3 years from June 27, 2016, have an exercise price of
NIS 0.7884 per ordinary share, and are exercisable for 8 years from June 27, 2016, provided, however, that no options are exercisable
prior to our adoption a revised compensation policy in accordance with the Companies Law.





83






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



Board
of Directors and Officers



Our
board of directors presently consists of eight directors. Each of Ms. Stern-Raff, Mr. Tzror, Mr. Steinberg, Mr. Agmon, and Mr.
Weber qualifies as an independent director under the corporate governance standards of the NASDAQ Listing Rules and the independence
requirements of Rule 10A-3 of the Exchange Act. Under the Companies Law, except as provided below, companies incorporated under
the laws of the State of Israel that are “public companies,” including Israeli companies with shares listed on NASDAQ,
are required to appoint at least two external directors who meet the qualification requirements set forth in the Companies Law.
On July 13, 2016, our Board of Directors resolved to adopt the corporate governance exception set forth in Regulation 5D of the
Israeli Companies Regulations (Relief for Public Companies with Shares Listed for Trading on a Stock Market Outside of Israel),
5760-2000. In accordance with such Regulation, a public company with securities listed on certain foreign exchanges, including
NASDAQ, that satisfies the applicable foreign country laws and regulations that apply to companies organized in that country relating
to the appointment of independent directors and composition of audit and compensation committees and have no controlling shareholder
are exempt from the requirement to appoint external directors or comply with the audit committee and compensation committee composition
requirements under the Companies Law. In accordance with our Board’s resolution, for so long as Kitov Parent does not have
a controlling shareholder as defined in Section 1 of the Companies Law, Kitov Parent intends to comply with the NASDAQ Listing
Rules in connection with a majority of independent directors on the Board and in connection with the composition of each of the
Audit Committee and the Compensation Committee, in lieu of such requirements set forth under the Companies Law. A majority of
our Board members are independent as required by the NASDAQ Listing Rules. Furthermore, our audit committee consists of at least
three independent directors, and our Compensation Committee consists of at least two independent directors. Should any person
or entity become deemed to be a controlling shareholder as defined in Section 1 of the Companies Law, then in accordance with
Section 248(a) of the Companies Law, we will be required to convene a special general meeting of the shareholders at the earliest
possible date, the agenda of which shall include the appointment of at least two external directors. Following such appointment,
all of the external directors shall be appointed to each of our audit committee and compensation committee, and at least one external
director shall be appointed to each committee of the Board of Directors authorized to exercise any of the powers of the board
of directors.



Our
directors are elected to serve are divided into three classes, with each class comprising one-third of the members of our board
of directors (the “Board”) (who are not external directors, if any were appointed), (hereinafter the “first
class”; the “second class”; and the “third class”). If the number of directors is not equally divisible
by three, each of the first class and the second class will be comprised of a different number, the closest and lowest to one-third,
while the third class will be comprised of the remaining directors (who are not external directors, if any were appointed). If
the number of directors changes, the number of directors in each class will change in accordance with the aforesaid rule.



At
our 2017 annual general meeting of shareholders, the appointment of the directors included in the second class shall end. At our
2018 general meeting of shareholders, the appointment of the directors included in the third class shall end. At our 2019 general
meeting of shareholders, the appointment of the directors included in the first class shall end. At our annual general meeting
of our shareholders, the shareholders are entitled to elect directors who shall be elected for a Three-Year Term to replace the
class of directors whose term in office has expired as of such annual general meeting of our shareholders, and so on ad infinitum,
so that the directors who shall be elected as stated above shall enter office at the end of the annual general meeting of our
shareholders at which they were elected, unless a later date for commencement of the term was decided at the time of the appointment,
and shall serve for Three-Year Terms (unless their appointment will be terminated in accordance with the provisions of our amended
and restated articles of association), and so that each year, the terms in office of one of the classes of directors shall expire
at the annual general meeting of our shareholders for such year. A “Three-Year Term” means a term of office of a director
until the third annual general meeting of our shareholders which shall be held following the date of their election as director,
provided that each director shall continue to serve in office until his or her successor is duly elected and qualified, or until
his or her retirement, death, resignation or removal. Our Board may appoint a director at any time to fill any vacancies until
the annual meeting of our shareholders set to take place at the end of the Three-Year Term for the class of directors to which
such director is so appointed by the Board, provided that the total number of the members of the Board serving at such time will
not exceed the Maximum Number. The shareholders may at all times, by a Special Majority vote of the shareholders, replace or dismiss
a director (in the case of replacement, only if the appointed director is not a corporation). A director to be replaced shall
be given a reasonable opportunity to address the shareholders at their meeting. The tenure of a director expires pursuant to the
provisions of our amended and restated articles of association and the Companies Law, upon death or if s/he becomes incompetent,
unless removed from office as described above.





84






Under
our amended and restated articles of association, the number of directors on our Board will be no less than four and no more than
nine (including any external directors, to the extent that we may be required to appoint external directors in accordance with
the Companies Law and any Regulations enacted thereunder) (“Maximum Number”). The majority of the members of the Board
shall be residents of Israel, unless our center of management shall have been transferred to another country in accordance with
a resolution of our Board by a majority of three quarters (75%) of the participating director votes. The number of directors may
be changed, at any time and from time to time, by our shareholders with a majority of (a) 75% of the voting rights participating
and voting on the matter in the applicable general meeting of our shareholders and (b) more than 47.9% of all of the voting rights
in Kitov Parent as of the record date established for the applicable general meeting of our shareholders (“Special Majority”).



In
addition, under the Companies Law, our board of directors must determine the minimum number of directors who are required to have
financial and accounting expertise. Under applicable regulations, a director with financial and accounting expertise is a director
who, by reason of his or her education, professional experience and skill, has a high level of proficiency in and understanding
of business accounting matters and financial statements. He or she must be able to thoroughly comprehend the financial statements
of the company and initiate debate regarding the manner in which financial information is presented. In determining the number
of directors required to have such expertise, the board of directors must consider, among other things, the type and size of the
company and the scope and complexity of its operations. Our board of directors has determined that we require at least one director
with the requisite financial and accounting expertise and that Mr. Rock (who also serves as our CFO), Mr. Steinberg, Ms. Stern-Raff,
Mr. Weber and Mr. Tzror are each deemed to have such expertise.



At
our 2017 annual general meeting of shareholders, the terms of the directors included in the second class (Messrs. Steinberg, Agmon,
Tzror) shall end. At our 2018 general meeting of shareholders, the terms of the directors included in the third class (Messrs.
Israel and Rock and Ms. Stern-Raff) shall end. At our 2019 general meeting of shareholders, the terms of the directors included
in the first class (Dr. Waymack and Mr. Weber) shall end.



In
addition to our present directors whose current terms of office are detailed above, the following persons served as directors
during all or a part of 2016: Mr. Yair Katzir served as a director until March 2, 2017; Ms. Leah Bruck served as a director until
January 25, 2017; Dr. Alain Zeitoun served as a director until December 16, 2016; and, Ms. Moran Sherf-Blau served as a director
until September 27, 2016.



Alternate
Directors



Our
amended and restated articles of association provide, as allowed by the Companies
Law, that any director may, at all times, appoint any person (which is not a corporation) by written notice to us to serve as
an alternate director at a meeting of the board of directors. A person who is not qualified to be appointed as a director, a person
who is already serving as a director or a person who is already serving as an alternate director for another director, may not
be appointed as an alternate director, unless otherwise permitted by applicable law. A director who is already serving as a director
may be appointed as an alternate director for a member of a committee of the board of directors so long as he or she is not already
serving as a member of such committee, and if the alternate director is to replace an external director, he or she is required
to be an external director and to have either “financial and accounting expertise” or “professional expertise,”
depending on the qualifications of the external director he or she is replacing. So long as the external director’s appointment
is valid, the alternate director shall be entitled to participate and vote in every meeting of the board of directors from which
the appointing director is absent. Subject to the terms of appointment, the alternate director will be regarded as a director
and shall have all of the authority of the director he or she is replacing. An appointing director may at any time cancel the
appointment of an alternate director. The term of appointment of an alternate director will end if the appointing director notifies
us in writing of the termination or cancellation of the appointment or if the appointing director’s appointment is terminated.





85






External
Directors



Qualifications
of External Directors



Under
the Companies Law companies incorporated under the laws of the State of Israel that are “public companies,” including
Israeli companies with shares listed on NASDAQ, are required to appoint at least two external directors who meet the qualification
requirements set forth in the Companies Law. On July 13, 2016, our Board of Directors resolved to adopt the corporate governance
exception set forth in Regulation 5D of the Israeli Companies Regulations (Relief for Public Companies with Shares Listed for
Trading on a Stock Market Outside of Israel), 5760-2000. In accordance with such Regulation, a public company with securities
listed on certain foreign exchanges, including NASDAQ, that satisfies the applicable foreign country laws and regulations that
apply to companies organized in that country relating to the appointment of independent directors and composition of audit and
compensation committees and have no controlling shareholder are exempt from the requirement to appoint external directors or comply
with the audit committee and compensation committee composition requirements under the Companies Law. In accordance with our Board’s
resolution, for so long as Kitov Parent does not have a controlling shareholder as defined in Section 1 of the Companies Law,
Kitov Parent intends to comply with the NASDAQ Listing Rules in connection with a majority of independent directors on the Board
and in connection with the composition of each of the Audit Committee and the Compensation Committee, in lieu of such requirements
set forth under the Companies Law. A majority of our Board members are independent as required by the NASDAQ Listing Rules. Furthermore,
our Audit Committee consists of at least three independent directors, and our Compensation Committee consists of at least two
independent directors. Should any person or entity become deemed to be a controlling shareholder as defined in Section 1 of the
Companies Law, then in accordance with Section 248(a) of the Companies Law, we will be required to convene a special general meeting
of the shareholders at the earliest possible date, the agenda of which shall include the appointment of at least two external
directors. Following such appointment, all of the external directors shall be appointed to each of our Audit Committee and Compensation
Committee, and at least one external director shall be appointed to each committee of the Board of Directors authorized to exercise
any of the powers of the board of directors.



A
person may not serve as an external director if the person is a relative of a controlling shareholder or if on the date of the
person’s appointment or within the preceding two years the person or his or her relatives, partners, employers or anyone
to whom that person is subordinate, whether directly or indirectly, or entities under the person’s control have or had any
affiliation with any of ( “Affiliated Party”): (1) us; (2) any person or entity controlling us on the date of such
appointment; (3) any relative of a controlling shareholder; or (4) any entity controlled, on the date of such appointment or within
the preceding two years, by us or by a controlling shareholder. If there is no controlling shareholder or any shareholder holding
25% or more of voting rights in the company, a person may not serve as an external director if the person has any affiliation
to the chairman of the board of directors, the general manager (chief executive officer), any shareholder holding 5% or more of
the company’s shares or voting rights or the senior financial officer as of the date of the person’s appointment.



The
term “controlling shareholder” means a shareholder with the ability to direct the activities of the company, other
than by virtue of being an office holder. A shareholder is presumed to have “control” of the company and thus to be
a controlling shareholder of the company if the shareholder holds 50% or more of the “means of control” of the company.
“Means of control” is defined as (1) the right to vote at a general meeting of a company or a corresponding body of
another corporation; or (2) the right to appoint directors of the corporation or its general manager. For the purpose of approving
transactions with controlling shareholders, the term also includes any shareholder that holds 25% or more of the voting rights
of the company if the company has no shareholder that owns more than 50% of its voting rights. For purposes of determining the
holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the
company’s approval are deemed as joint holders.



The
term affiliation includes:



| | ● | an
    employment relationship;
| | - | -------------------------------



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



| | ● | control;
    and
| | - | ----------------



| | ● | service
    as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the
    public 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





86






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



The
term “office holder” is defined as a general manager, chief business manager, deputy general manager, vice general
manager, director or manager directly subordinate to the general manager or any other person assuming the responsibilities of
any of the foregoing positions, without regard to such person’s title.



A
person may not serve as an external director if that person or that person’s relative, partner, employer, a person to whom
such person is subordinate (directly or indirectly) or any entity under the person’s control has a business or professional
relationship with any entity that has an affiliation with any Affiliated Party, even if such relationship is intermittent (excluding
insignificant relationships). Additionally, any person who has received compensation intermittently (excluding insignificant relationships)
other than compensation permitted under the Companies Law may not continue to serve as an external director.



No
person can serve as an external director if the person’s position or other affairs create, or may create, a conflict of
interest with the person’s responsibilities as a director or may otherwise interfere with the person’s ability to
serve as a director or if such a person is an employee of the Israeli Securities Authority or of an Israeli stock exchange. If
at the time an external director is appointed all current members of the board of directors, who are not controlling shareholders
or relatives of controlling shareholders, are of the same gender, then the external director to be appointed must be of the other
gender. In addition, a person who is a director of a company may not be elected as an external director of another company if,
at that time, a director of the other company is acting as an external director of the first company.



The
Companies Law provides that an external director must meet certain professional qualifications or have financial and accounting
expertise, and that at least one external director must have financial and accounting expertise. However, if at least one of our
other directors (1) meets the independence requirements of the Exchange Act, (2) meets the standards of the NASDAQ Listing Rules
for membership on the audit committee and (3) has financial and accounting expertise as defined in the Companies Law and applicable
regulations, then neither of our external directors is required to possess financial and accounting expertise as long as both
possess other requisite professional qualifications. The determination of whether a director possesses financial and accounting
expertise is made by the board of directors. A director with financial and accounting expertise is a director who by virtue of
his or her education, professional experience and skill, has a high level of proficiency in and understanding of business accounting
matters and financial statements so that he or she is able to fully understand our financial statements and initiate debate regarding
the manner in which the financial information is presented.



The
regulations promulgated under the Companies Law define an external director with requisite professional qualifications as a director
who satisfies one of the following requirements: (1) the director holds an academic degree in either economics, business administration,
accounting, law or public administration, (2) the director either holds an academic degree in any other field or has completed
another form of higher education in the company’s primary field of business or in an area which is relevant to his or her
office as an external director in the company, or (3) the director has at least five years of experience serving in any one of
the following, 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 substantial scope of business, (b) a senior position in the company’s primary
field of business or (c) a senior position in public administration.



Except
in the case of a cessation of the classification of the director as an external director following the adoption by certain companies
listed on foreign stock exchanges, including NASDAQ, of the corporate governance exceptions set forth in the Regulation, as described
above, until the lapse of a two-year period from the date that an external director of a company ceases to act in such capacity,
the company in which such external director served, and its controlling shareholder or any entity under control of such controlling
shareholder may not, directly or indirectly, grant such former external director, or his or her spouse or child, any benefit,
including via (i) the appointment of such former director or his or her spouse or his child as an officer in the company or in
an entity controlled by the company’s controlling shareholder, (ii) the employment of such former external director and
(iii) the engagement, directly or indirectly, of such former external director as a provider of professional services for compensation,
including via an entity under his or her control. With respect to a relative who is not a spouse or a child, such limitations
shall only apply for one year from the date such external director ceased to be engaged in such capacity.





87






Election
and Dismissal of External Directors



Under
Israeli law, external directors are elected by a majority vote at a shareholders’ meeting, provided that either:



| | ● | the
    majority of the shares that are voted at the meeting in favor of the election of the external director, excluding abstentions,
    include at least a majority of the votes of shareholders who are not controlling shareholders and do not have a personal interest
    in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling
    shareholder); or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    total number of shares held by non-controlling shareholders or any one on their behalf that are voted against the election
    of the external director does not exceed two percent of the aggregate voting rights in the company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under
Israeli law, the initial term of an external director of an Israeli public company is three years. The
Companies Law provides that after an initial term of three years, external directors may be re-elected to serve in that capacity
for up to two additional three year terms, provided that either: (i) (1) his or her service for each such additional term is recommended
by one or more shareholders holding in aggregate at least 1% of the company’s voting rights and is approved at a shareholders
meeting by a majority of the shares held by non-controlling shareholders who 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 for such purpose any abstentions, where the total number of shares held by non-controlling, disinterested
shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company; and (2) the external director
who has been nominated in such fashion by the shareholders is not a “linked or competing shareholder”, and does not
have or has not had, on or within the two years preceding the date of such person’s appointment to serve as another term
as external director, any affiliation with a linked or competing shareholder. The term “linked or competing shareholder”
means the shareholder(s) who nominated the external director for reappointment or a substantial shareholder of the company holding
more than 5% of the shares in the company, provided that at the time of the reappointment, such shareholder(s) of the company,
the controlling shareholder of such shareholder(s) of the company, or a company under such shareholder(s) of the company’s
control, has a business relationship with the company or are competitors of the company; (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 disinterested majority
required for the initial election of an external director (as described above); or (iii) the external director has proposed himself
for reappointment and the reappointment was approved as provided in sub-section (i) above. The term of office for external directors
for Israeli companies traded on certain foreign stock exchanges, including NASDAQ, may be further extended, indefinitely, in increments
of additional three-year terms, in each case provided that, in addition to re-election in such manner described above: (1) the
audit committee and subsequently 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 re-election for such additional
period is beneficial to the company; and (2) prior to the approval of the reelection of the external director, the company’s
shareholders have been informed of the term previously served by such nominee and of the reasons why the board of directors and
audit committee recommended the extension of such nominee’s term.An external director may be removed by the same
special majority of the shareholders required for his or her election, if he or she ceases to meet the statutory qualifications
for appointment or if he or she violates his or her fiduciary duty to the company. An external director may also be removed by
order of an Israeli court if the court finds that the external director is permanently unable to exercise his or her office, has
ceased to meet the statutory qualifications for his or her appointment, has violated his or her fiduciary duty to the company,
or has been convicted by a court outside Israel of certain offenses detailed in the Companies Law.



If
the vacancy of an external directorship causes a company to have fewer than two external directors, the company’s board
of directors is required under the Companies Law to call a special general meeting of the company’s shareholders as soon
as possible to appoint such number of new external directors so that the company thereafter has two external directors.





88






Additional
Provisions Relating to External Directors



Under
the Companies Law, each committee authorized to exercise any of the powers of the board of directors is required to include at
least one external director and its audit and compensation committees are required to each include all of the external directors.



An
external director is entitled to compensation and reimbursement of expenses in accordance with regulations promulgated under the
Companies Law and is prohibited from receiving any other compensation, directly or indirectly, in connection with serving as a
director except for certain exculpation, indemnification and insurance provided by the company, as specifically allowed by the
Companies Law.



Audit
Committee



Companies
Law Requirements



Under
the Companies Law, the board of directors of any public company must also appoint an audit committee. Except in the case of companies
listed on foreign stock exchanges, including NASDAQ, which have adopted the corporate governance exceptions set forth in the Regulation,
such as our company, as described under ” Qualification of External Directors”, who are exempt from the audit committee
composition requirements under the Companies Law, audit committees under the Companies Law must be comprised of at least three
directors, including all of the external directors. The chairman of the audit committee must be an external director. The audit
committee may not include:



| | ● | the
    chairman of the board of directors;
| | - | -------------------------------------------



| | ● | a
    controlling shareholder or a relative of a controlling shareholder;
| | - | -------------------------------------------------------------------------



| | ● | any
    director employed by us or by one of our controlling shareholders or by an entity controlled by our controlling shareholders
    (other than as a member of the board of directors); or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | any
    director who regularly provides services to us, to one of our controlling shareholders or to an entity controlled by our controlling
    shareholders.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



According
to the Companies Law, the majority of the members of the audit committee, as well as the majority of members present at audit
committee meetings, will be required to be “unaffiliated” under the Companies Law (as defined below) and the chairman
of the audit committee will be required to be an external director. Any persons disqualified from serving as a member of the audit
committee may not be present at the audit committee meetings, unless the chairman of the audit committee has determined that such
person is required to be present at the meeting or if such person qualifies under one of the exemptions of the Companies Law.



The
term “unaffiliated director” is defined under the Companies Law as either an external director or an “unaffiliated
director” who meets the following conditions and who is appointed or classified as such according to the Companies Law:
(1) the conditions for his or her appointment as an external director (as described above) are satisfied and the audit committee
approves the director having met such conditions and (2) he or she has not served as a director of the company for over nine consecutive
years with any interruption of up to two years of his or her service not being deemed a disruption to the continuity of his or
her service.



Under
the NASDAQ Listing Rules, we are required to maintain an audit committee consisting of at least three independent directors, all
of whom are financially literate and one of whom has accounting or related financial management expertise.



Each
of the members of the audit committee is required to be “independent” as such term is defined in Rule 5605(a)(2) of
the NASDAQ Listing Rules and in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence
of board and committee members. The independence requirements of the Exchange Act implement two basic criteria for determining
independence: (1) audit committee members are barred from accepting directly or indirectly any consulting, advisory or other compensatory
fee from the issuer or an affiliate of the issuer, other than in the member’s capacity as a member of the board of directors
and any board committee, and (2) audit committee members may not be an “affiliated person” of the issuer or any subsidiary
of the issuer apart from her or his capacity as a member of the board of directors and any board committee. The SEC has defined
“affiliate” for non-investment companies as “a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person specified.” The term “control” is
intended to be consistent with the other definitions of this term under the Exchange Act as “the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.”





89






Audit
Committee Role



Under
the Companies Law, our audit committee:





| | ● | recommends to the board of directors to recommend to our shareholders to appoint and approve the compensation of the independent registered public accounting firm engaged to audit our financial statements;                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | monitors deficiencies in the management of the Company, inter alia, in consultation with the independent registered public accounting firm and internal auditor, and advises the board of directors on how to correct such deficiencies;                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | decides whether to approve and recommend to the board of directors to approve engagements or transactions that require the audit committee’s approval under the Companies Law relating generally to certain related party transactions. The audit committee must pre-determine procedures for a competitive process, or other procedures, before approving related party transactions with controlling shareholders, even if such transactions are deemed by the audit committee not to be extraordinary transactions. This process is to be supervised by the audit committee, or any person authorized for such supervision, or via any other method approved by the audit committee;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | decides as to what transactions shall be considered as “extraordinary transactions” as such term is defined under the Companies Law in connection with related party transaction;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | determines the approval process for transactions that are not negligible, as well as determine which types of transactions would require the approval of the audit committee. Non-negligible transactions are defined as related party transactions with a controlling shareholder, or in which the controlling shareholder has a personal interest, even if they are deemed by the audit committee not to be extraordinary transactions but which have also been classified by the audit committee as non-negligible transactions;                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | meets and receives reports from both the internal auditors and the independent registered public accounting firm dealing with matters that arise in connection with their audits; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | regulates the Company’s rules on employee complaints, and implementing a whistleblower protection plan with respect to employee complaints of business irregularities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



In
accordance with the Sarbanes-Oxley Act of 2002 and the NASDAQ Listing Rules, the audit committee is also directly responsible
for the appointment, compensation and performance of our independent auditors, and pre-approves audit and non-audit services to
be provided by the independent auditors. In addition, the audit committee is responsible for assisting the board of directors
in reviewing our annual financial statements, the adequacy of our internal controls and our compliance with legal and regulatory
requirements. The audit committee also oversees our major financial risk exposures and policies for managing such potential risks,
discusses with management and our independent auditor significant risks or exposure and assesses the steps management has taken
to minimize such risk.



Our
board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee, which are
consistent with the provisions of the Companies Law, rules and regulations of the SEC and the NASDAQ Listing Rules.



Approval
of Transactions with Related Parties



The
approval of the audit committee (or under certain circumstances the compensation committee) is required to effect specified actions
and transactions with office holders and controlling shareholders and their relatives, or in which they have a personal interest.
The audit committee may not approve an action or a transaction with a controlling shareholder or with an office holder unless
at the time of approval the audit committee meets the composition requirements under the Companies Law.





90






Our
audit committee consists of Ms. Revital Stern-Raff, Mr. Steven Steinberg and Mr. Arye Weber. All members of our audit committee
meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Listing Rules.
Our board of directors has determined that Ms. Stern-Raff and Mr. Steinberg are audit committee financial experts as defined by
the SEC rules and have the requisite financial experience as defined by the NASDAQ Listing Rules.



Compensation
Committee



Amendment
No. 20 to the Companies Law, which became effective as of December 2012 (“Amendment No. 20”), established new regulations
relating to the terms of office and employment of directors and officers in Israeli public companies and companies that have publicly
issued debentures. Such companies are required to appoint a compensation committee in accordance with the guidelines set forth
in the Companies Law.



Except
in the case of companies listed on foreign stock exchanges, including NASDAQ, which have adopted the corporate governance exceptions
set forth in the Regulation, such as our company, as described under ” Qualification of External Directors”, who are
exempt from the compensation committee composition requirements under the Companies Law, the compensation committee must comply
with the following requirements (the “Israeli Compensation Committee Composition Requirements”):



| | i. | The
                                         compensation committee must consist of at least three members;
| | -- | -----------------------------------------------------------------------------------------------------------

| | ii. | All
                                         of the external directors must serve on the committee and constitute a majority of its
                                         members;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | iii. | The
                                         chairman of the compensation committee must be an external director;
| | ---- | -----------------------------------------------------------------------------------------------------------------

| | iv. | The
                                         remaining members need not be external directors but must be directors who qualify to
                                         serve as members of the audit committee (as described above); and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | v. | The
                                         provisions of the Companies Law and Regulations that govern the compensation and reimbursement
                                         terms of external directors must also apply to members of the compensation committee
                                         who are not external directors.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
accordance with the Companies Law, the roles of the compensation committee are, among others, as follows:



| | ● | to
    recommend to the board of directors the compensation policy for directors and officers, and to recommend to the board of directors
    once every three years whether the compensation policy that had been approved should be extended for a period of more than
    three years;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | to
    recommend to the board of directors updates to the compensation policy, from time to time, and examine its implementation;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | ● | to
    decide whether to approve the terms of office and employment of directors and officers that require approval of the compensation
    committee; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | to
    decide whether the compensation terms of the chief executive officer of Kitov Parent which were determined pursuant to the
    compensation policy need not be brought for approval of the shareholders because it will harm the ability to engagement with
    the chief executive officer.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
addition to the roles mentioned above our compensation committee will also make recommendations to our board of directors regarding
the awarding of employee equity grants.



Our
board of directors has adopted a compensation committee charter setting forth the responsibilities of the compensation committee,
which are consistent with the provisions of the Companies Law, rules and regulations of the SEC and the NASDAQ Listing Rules.
Our compensation committee presently consists of Mr. Steven Steinberg, Mr. Arye Weber and Mr. Ido Agmon.





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Under
Amendment 27 to the Companies Law, which became effective as of February 17, 2016, the audit committee of an Israeli public company,
which has not adopted the corporate governance exceptions set forth in the Regulation, as described above, for certain companies
listed on foreign stock exchanges, and which meets the Israeli Compensation Committee Composition Requirements is permitted to
act as the compensation committee of the company in lieu of having a separate committee. On March 16, 2016 our board of directors
resolved to have the audit committee assume the responsibilities of the compensation committee pursuant to this new provision
in the Companies Law, and our audit committee acted as our compensation committee until July 13, 2016 when our Board of Directors
resolved to adopt the corporate governance exceptions set forth in the Regulation, as described above, thereby exempting us from
the audit and compensation committee composition requirements under the Companies Law, provided that we comply with the with the
NASDAQ Listing Rules in connection with a majority of independent directors on the Board and in connection with the composition
of each of the Audit Committee and the Compensation Committee, which such Listing Rules require to be two separate committees.



Compensation
Policy



In
accordance with the provisions of Amendment No. 20, public companies must adopt a compensation policy with respect to the terms
of service and employment of their directors and officers. The compensation policy must be approved by the compensation committee
(or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board of directors, and
subject to limited exceptions, by the shareholders. Shareholder approval requires one of the following: (i) the majority of shareholder
votes counted at general meeting including the majority of all of the votes of those shareholders who are non-controlling shareholders
and do not have a personal interest in the approval of the compensation policy, who participate at the meeting (excluding abstentions)
or (ii) the total number of votes against the proposal among the shareholders mentioned in paragraph (i) does exceed two percent
(2%) of the voting rights in the company. Under special circumstances, the board of directors may approve the compensation policy
despite the objection of the shareholders on the condition that the compensation committee (or the audit committee acting in lieu
of a compensation committee pursuant to the Companies Law) and then the board of directors decide, on the basis of detailed arguments
and after discussing again the compensation policy, that approval of the compensation policy, despite the objection of the meeting
of shareholders, is for the benefit of the company.



On
January 12, 2014, Kitov Parent’s shareholders approved Kitov Parent’s initial compensation policy (as amended by the
shareholders on November 20, 2014) which was in effect for a period of three years from the date of approval, until January 12,
2017 (the “Initial Compensation Policy”). As of the date of this annual report, Kitov Parent’s shareholders
have not yet approved a new compensation policy (the “Compensation Policy”). Our Compensation Committee is presently
working on finalizing the new Compensation Policy. Following approval by the Board of Directors of Kitov Parent, the proposed
new Compensation Policy is expected to be published by Kitov Parent before the end of the second quarter of 2017, for the approval
of shareholders of Kitov Parent. Until the new Compensation Policy is approved, any approvals for amendments to any office holder
compensation will need the applicable corporate approvals required for compensation which deviates from an approved compensation
policy.



The
Initial Compensation Policy did not, and the new Compensation Policy will not, on its own, grant any rights to our directors or
officers. The Initial Compensation Policy includes, and the new Compensation Policy is expected to include both long term and
short term compensation elements and is to be reviewed from time to time by our compensation committee (or the audit committee
acting in lieu of a compensation committee pursuant to the Companies Law) and board, according to the requirements of the Companies
Law.



In
general, compensation for officers will be examined while taking into consideration the following parameters, including, among
others (i) education, qualifications, expertise, seniority (with us in particular, and in the officer’s profession in general),
professional experience and achievements of the officer; (ii) meeting by the officer of the targets set for him, if relevant;
(iii) the officer’s position, the scope of his responsibility and previous wage agreements that were signed with him; and
(iv) the ratio between the total cost of the proposed engagement terms of an officer and the total cost of the wages for all of
our other employees, officers and contractors, and in particular compared to the average or median wage of such employees, officers
and contractors and the effect of this ratio and difference, if any, on labor relations.





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Under
the Initial Compensation Policy, we are entitled to provide a compensation package to officers which may include fixed salary
(a base salary and ancillary benefits), annual cash bonus, special bonuses and share-based compensation, or any combination thereof,
and additional standard benefits (“Compensation Package”). An unofficial English translation of the full text of Kitov
Parent’s Initial Compensation Policy is attached as an exhibit to this Annual Report on Form 20-F.



Investment
Committee



Our
board of directors has established an investment committee in order to oversee the management and investment of the Company’s
cash and cash equivalents. This committee meets on an ad hoc basis as required and is empowered to establish guidelines and policies,
as well as to make decisions, with respect to managing our financial assets. Since its establishment and to date, Mr. Simcha Rock
coordinates the management of the committee. The present members of the committee are Mr. Rock, Mr. Weber, Mr. Tzror and Mr. Agmon.
The investment committee provides periodic updates to the Board of Directors as required under the Companies Law. Our board of
directors has adopted an investment committee charter setting forth the responsibilities of the investment committee.



Science
and Technology Committee



Our
board of directors has established a science and technology committee in order to advise and assist the Board of Directors of
the Company in the oversight of the Company’s research and development and technology programs. This committee shall meet on an
ad hoc basis as required, but not less frequently than as established by our board of directors. The present members of the committee
are Dr. Waymack, Dr. Ben-Menachem, and Mr. Agmon. The science and technology committee provides periodic updates to the Board
of Directors as required under the Companies Law. Our board of directors has adopted a science and technology committee charter
setting forth the responsibilities of the investment committee.



Internal
Auditor



Under
the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of
the audit committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply
with applicable law and orderly business procedure. Under the Companies Law, the internal auditor may not be a related party or
an office holder or a relative of a related party or of an office holder, nor may the internal auditor be the company’s
independent auditor or the representative of the same.



A
“related party” is defined in the Companies Law as (i) a holder of 5% or more of the issued share capital or voting
power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive
officer of the company, or (iii) any person who serves as a director or as a chief executive officer of the company. Until his
resignation on June 8, 2016 (for reasons not connected to the Company) our internal auditor was Mr. Pinhas Bar-Shmuel, certified
public accountant (Isr.). On July 13, 2016, our Board, of Directors, following the recommendation of our Audit Committee, resolved
to appoint as the Company’s new internal auditor, Mr. Yisrael Gewirtz, a partner at Fahn Kanne Control Management Ltd.,
a member firm of Grant Thornton International.



Fiduciary
Duties and Approval of Specified Related Party Transactions and Compensation under Israeli Law



Fiduciary
Duties of Office Holders



The
Companies Law imposes a duty of care and a fiduciary duty on all office holders of a company. The duty of care of an office holder
is based on definition of negligence under the Israeli Torts Ordinance (New Version) 5728-1968. This duty of care requires an
office holder to act with the degree of proficiency with which a reasonable office holder in the same position would have acted
under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means, in light of the circumstances,
to obtain:



| | ● | information
    on the business 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 such action.
| | - | --------------------------------------------------------------





93






The
fiduciary duty incumbent on an office holder requires him or her to act in good faith and for the benefit of the company, and
includes, among other things, the duty to:



| | ● | refrain
    from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other
    duties or personal affairs;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | refrain
    from any activity that is competitive with the business of the company;
| | - | -----------------------------------------------------------------------------------



| | ● | refrain
    from exploiting any business opportunity of the company for the purpose of gaining a personal advantage 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We
may approve an act specified above which would otherwise constitute a breach of the office holder’s fiduciary duty, provided
that the office holder acted in good faith, the act or its approval does not harm the company, and the office holder discloses
his or her personal interest a sufficient time before the approval of such act. Any such approval is subject to the terms of the
Companies Law, setting forth, among other things, the appropriate corporate bodies of the company entitled to provide such approval,
and the methods of obtaining such approval.



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



The
Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and
all related material information or documents relating to any existing or proposed transaction by 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. An office holder is not obliged to disclose such information if the personal interest of
the office holder 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, once an office holder has complied with the above disclosure requirement, a company may approve a transaction
between the company and the office holder or a third party in which the office holder has a personal interest. However, a company
may not approve a transaction or action that is not to the company’s benefit.



Under
the Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder or with
a third party in which the office holder has a personal interest, which is not an extraordinary transaction, requires approval
by the board of directors. The Companies Law provides that such a transaction, which is not an extraordinary transaction, may
be approved by the board of directors or a committee of the board of directors or any other entity (which has no personal interest
in the transaction) authorized by the board of directors. Our amended and restated articles of association provide that transactions
in which officers have a personal interest but not extraordinary transactions can be approved by our chief executive officer and
chief financial officer (unless they have the personal interest; in which case it will be one of our directors instead of such
interested officer). If the transaction considered is an extraordinary transaction with an office holder or third party in which
the office holder has a personal interest, then audit committee approval is required prior to approval by the board of directors.
For the approval of compensation arrangements with directors and executive officers, see “Item 6. Directors, Senior Management
and Employees – B. Compensation .”



Any
persons who have a personal interest in the approval of a transaction that is brought before a meeting of the board of directors
or the audit committee may not be present at the meeting or vote on the matter. However, if the chairman of the board of directors
or the chairman of the audit committee has determined that the presence of an office holder with a personal interest is required,
such office holder may be present at the meeting for the purpose of presenting the matter. Notwithstanding the foregoing, a director
who has a personal interest may be present at the meeting and vote on the matter if a majority of the directors or members of
the audit committee have a personal interest in the approval of such transaction. If a majority of the directors at a board of
directors meeting have a personal interest in the transaction, such transaction also requires approval of the shareholders of
the company.





94






A
“personal interest” is defined under the Companies Law as the personal interest of a person in an action or in a transaction
of the company, including the personal interest of such person’s relative or the interest of any other corporate body in
which the person or such person’s relative is a director or general manager, a 5% shareholder or holds 5% or more of the
voting rights, or has the right to appoint at least one director or the general manager, but excluding a personal interest stemming
solely from the fact of holding shares in the company. A personal interest also includes (1) a personal interest of a person who
votes according to a proxy of another person, including in the event that the other person has no personal interest, and (2) a
personal interest of a person who gave a proxy to another person to vote on his or her behalf regardless of whether the discretion
of how to vote lies with the person voting or not.



An
“extraordinary transaction” is defined under the Companies Law 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 the company’s profitability, assets or liabilities.
| | - | --------------------------------------------------------------------------------------------------------



Disclosure
of Personal Interests of a Controlling Shareholder and Approval of Transactions



The
Companies Law also requires that a controlling shareholder promptly disclose to the company any personal interest that he or she
may have and all related material information or documents relating to any existing or proposed transaction by the company. A
controlling shareholder’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. Extraordinary transactions with a controlling shareholder or in which a controlling
shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest,
and the terms of engagement of the company, directly or indirectly, with a controlling shareholder or a controlling shareholder’s
relative (including through a corporation controlled by a controlling shareholder), regarding the company’s receipt of services
from the controlling shareholder, and if such controlling shareholder is also an office holder of the company, regarding his or
her terms of employment, require the approval of each of (i) the audit committee or the compensation committee with respect to
the terms of the engagement of the company, (ii) the board of directors and (iii) the shareholders, in that order. In addition,
the shareholder approval must fulfill one of the following requirements:



| | ● | a
    majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting
    must be voted in favor of approving the transaction, excluding abstentions; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                    
| | ● | the
    shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no
    more than 2% of the voting rights in the company.                          



In
addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest
with a term of more than three years requires the abovementioned approval every three years, however, such transactions not involving
the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such
longer term is reasonable under the circumstances.



The
Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding
a transaction with a controlling shareholder or in which such has a personal interest, must indicate in advance or in the ballot
whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation
of that shareholder’s vote. For more information regarding exemptions from shareholder approval for extraordinary transactions
with a controlling shareholder, see “Item 10 – Additional Information – B. Memorandum and Articles of Association
– Board of Directors.”





95






Compensation
of Directors and Executive Officers



Directors.
Under Amendment No. 20, the compensation of our directors with respect their service as a director, as well as their engagement
in other roles (if the director is so engaged) requires the approval of our compensation committee (or the audit committee acting
in lieu of a compensation committee pursuant to the Companies Law), the subsequent approval of the board of directors and, unless
exempted under the regulations promulgated under the Companies Law, the approval of the shareholders at a general meeting. If
the compensation of a director is inconsistent with our duly approved compensation policy, or compensation is approved prior to
the approval of a new compensation policy upon expiration of the term of the previous compensation policy, then, provided that
those provisions that must be included in the compensation policy according to the Companies Law have been considered by the compensation
committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board of directors,
shareholder approval will also be required, as follows:



| | ● | 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 matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions;
    or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter
    voting against the compensation package does not exceed 2% of the aggregate voting rights in the company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If
the amounts of cash compensation to be paid to each independent director will be the same as that which is paid to our other independent
directors, and will not be in excess of the maximum amounts set forth under Regulations 4, 5 and 7 of the Companies Regulations
(Rules Concerning Compensation and Expenses for an External Director), 5760-2000, then the compensation committee (or the audit
committee acting in lieu of a compensation committee pursuant to the Companies Law) and board of directors may determine that
payment of such compensation is an engagement which does not require the approval of our shareholders pursuant to the leniencies
set forth in Regulation 1A(2) under the Companies Regulations (Relief Regulations Regarding Transactions with Interested Parties,
5760-2000 (hereinafter: the “Relief Regulations”).



Executive
Officers Other Than the Chief Executive Officer. The Companies Law requires the compensation of a public company’s executive
officers (other than the chief executive officer) who are not directors at the company to be approved by, first, the compensation
committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law), second, by the company’s
board of directors and third, if such compensation arrangement is inconsistent with the company’s duly approved compensation
policy, or compensation is approved prior to the approval of a new compensation policy upon expiration of the term of the previous
compensation policy, the company’s shareholders (by a special majority vote as discussed above with respect to the approval
of director compensation). However, if the shareholders of the company do not approve a compensation arrangement with an executive
officer that is inconsistent with the company’s stated compensation policy, the compensation committee (or the audit committee
acting in lieu of a compensation committee pursuant to the Companies Law) and board of directors may override the shareholders’
decision if each of the compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to
the Companies Law) and the board of directors provide detailed reasons for their decision. Non-material amendments to the compensation
of a public company’s executive officers (other than the chief executive officer) may be approved by the chief executive
officer of the company if the company’s compensation policy has established that such amendments within the parameters established
in the compensation policy may be approved by the chief executive officer, and the compensation is consistent with the company’s
compensation policy.



Chief
Executive Officer. The compensation paid to a public company’s chief executive officer who is not a director at the
company is required to be approved by, first, the company’s compensation committee (or the audit committee acting in lieu
of a compensation committee pursuant to the Companies Law); second, the company’s board of directors, and, unless exempted
under the regulations promulgated under the Companies Law, by the company’s shareholders (by a special majority vote as
discussed above with respect to the approval of director compensation). However, if the shareholders of the company do not approve
the compensation arrangement with the chief executive officer who is not a director at the company, the compensation committee
(or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board of directors may override
the shareholders’ decision if each of the compensation committee (or the audit committee acting in lieu of a compensation
committee pursuant to the Companies Law) and the board of directors provide a detailed report for their decision. The renewal
or extension of the engagement with a public company’s chief executive officer need not be approved by the shareholders
of the company if the terms and conditions of such renewal or extension are no more beneficial than the previous engagement or
there is no substantial difference in the terms and conditions under the circumstances, and the terms and conditions of such renewal
or extension are in accordance with the company’s compensation policy.





96






The
compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board
of directors approval should be in accordance with the company’s duly approved compensation policy; however, in special
circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy provided
that they have considered those provisions that must be included in the compensation policy according to the Companies Law and
that shareholder approval was obtained (by a special majority vote as discussed above with respect to the approval of director
compensation). The compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies
Law) may waive the shareholder approval requirement with regards to the approval of the initial engagement terms of a candidate
for the chief executive officer position, if they determine that the compensation arrangement is consistent with the company’s
stated compensation policy, and that the chief executive officer did not have a prior business relationship with the company or
a controlling shareholder of the company and that subjecting the approval of the engagement to a shareholder vote would impede
the company’s ability to employ the chief executive officer candidate.



The
engagement with a public company’s office holder need not be approved by the shareholders of the company with respect to
the period from the commencement of the engagement until the next shareholder meeting convened by the company, if the terms and
conditions of such engagement were approved by the compensation committee (or audit committee acting in lieu of the compensation
company) and the board of directors of the company, the terms and conditions of such engagement are in accordance with the company’s
compensation policy approved in accordance with Section 267A of the Companies Law, and if the terms and conditions of such engagement
are no more beneficial than the terms and conditions of the person previously serving in such role or there is no substantial
difference in the terms and conditions of the previous engagement versus the new one under the circumstances, including the scope
of engagement.



Duties
of Shareholders



Under
the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an
acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, including, among
other things, when voting at meetings of shareholders on the following matters:



| | ● | an
    amendment to the articles of association;
| | - | ------------------------------------------------



| | ● | an
    increase in the company’s authorized share capital;
| | - | ----------------------------------------------------------



| | ● | a
    merger; and
| | - | -----------------



| | ● | the
    approval of related party transactions and acts of office holders that require shareholder approval.
| | - | ------------------------------------------------------------------------------------------------------------



A
shareholder also has a general duty to refrain from discriminating against other shareholders.



The
remedies generally available upon a breach of contract will also apply to a breach of the shareholder duties mentioned above,
and in the event of discrimination against other shareholders, additional remedies are available to the injured shareholder.



In
addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote
and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment
of an office holder, or any other power with respect to a company, is under a duty to act with fairness towards the company. The
Companies Law does not describe the substance of this duty 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, taking the shareholder’s position
in the company into account.





97






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



Under
the Companies Law and the Securities Law, 5738 – 1968 (“Securities Law”) a company may indemnify an office holder
in respect of the following liabilities, payments and expenses incurred for acts performed by him or her as an office holder,
either in advance of an event or following an event, provided its articles of association include a provision authorizing such
indemnification:



| | ● | a
    monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement
    or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to
    such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board
    of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an
    amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking
    shall detail the abovementioned foreseen events and amount or criteria;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | reasonable
    litigation expenses, including reasonable attorneys’ fees, incurred by the office holder as a result of an investigation
    or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided
    that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial
    liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding
    or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal
    intent or in connection with a monetary sanction;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | a
    monetary liability imposed on him or her in favor of a payment for a breach offended at an Administrative Procedure (as defined
    below) as set forth in Section 52(54)(a)(1)(a) to the Securities Law;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | expenses
    associated with an Administrative Procedure conducted regarding an office holder, including reasonable litigation expenses
    and reasonable attorneys’ fees; 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



An
“Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities
Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent
Procedures or Interruption of procedures subject to conditions) to the Securities Law.



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



| | ● | a
    breach of a fiduciary duty to the company, provided that the office holder acted in good faith and had a reasonable basis
    to believe that the act would not harm the company;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | 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;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | a
    monetary liability imposed on the office holder in favor of a third party;
| | - | --------------------------------------------------------------------------------



| | ● | a
    monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section
    52(54)(a)(1)(a) of the Securities Law; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | expenses
    incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and
    reasonable attorneys’ fees.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------





98






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



| | ● | a
    breach of fiduciary duty, except for indemnification and insurance for a breach of the fiduciary duty to the company to the
    extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the
    company;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | a
    breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the
    office holder;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | an
    act or omission committed with intent to derive illegal personal benefit; or
| | - | -----------------------------------------------------------------------------------



| | ● | a
    fine or forfeit levied against the office holder.
| | - | -------------------------------------------------------



Under
the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee
(or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and the board of directors and,
with respect to directors or controlling shareholders, their relatives and third parties in which such controlling shareholders
have a personal interest, also by the shareholders.



The
compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board
of directors may approve the inclusion of each director under the coverage of our directors and officers insurance policy without
the need for shareholder approval, if they determine that, pursuant to the leniencies set forth in Regulation 1B1 of the Relief
Regulations, the provision of such insurance coverage to the directors under our directors and officers insurance policy is being
granted on market terms, and with no material adverse effect on our profits, assets or obligations, and is consistent with our
Compensation Policy which was approved by our shareholders in accordance with the Companies Law, and is the same as the coverage
provided to all of our other directors.



The
compensation committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law) and board
of directors may approve the issuance to directors of our standard letters of waiver of liability and indemnification, immediately,
as of the date of their respective appointments as directors, with the approval by our shareholders being deferred to the next
general meeting of our shareholders following such approval, if they determine that, pursuant to the leniencies set forth in Regulation
1B4 of the Relief Regulations, that the letters which we issue to the appointed directors are consistent with our Compensation
Policy which was approved by our shareholders in accordance with the Companies Law, and are no more beneficial to the Appointed
Directors as such letters previously issued to our other directors.



Our
amended and restated articles of association permit us to exculpate, indemnify and
insure our office holders to the fullest extent permitted or to be permitted by law. Our office holders are currently covered
by a directors’ and officers’ liability insurance policy.



We
have entered into agreements with each of our current office holders exculpating them from a breach of their duty of care to us
to the fullest extent permitted by law, subject to limited exceptions, and undertaking to indemnify them to the fullest extent
permitted by law, subject to limited exceptions, including with respect to liabilities resulting from our Registration Statements
on Form F-1 filed in connection with our initial public offering in the U.S. during November 2015 and in connection with our July
2016 public offering, to the extent that these liabilities are not covered by insurance. This indemnification is limited to events
determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined
by the board of directors as reasonable under the circumstances. The maximum aggregate amount of indemnification that we may pay
to our office holders based on such indemnification agreement is with respect to all permitted indemnification, including in connection
with a public offering of our securities, an amount equal to 25% of our shareholders’ equity on a consolidated basis, based
on our most recent financial statements made publicly available before the date on which the indemnification payment was made.
Such indemnification amounts are in addition to any insurance amounts. Each office holder who agrees to receive this letter of
indemnification also gives his approval to the termination of all previous letters of indemnification that we have provided to
him or her in the past, if any.





99






On
February 7, 2017, we announced that the Israeli Securities Authority began a formal investigation (the “ISA Investigation”)
into, amongst other matters, our public disclosures around our lead drug candidate, KIT-302. For more information on the ISA Investigation
see “Item 8. Financial Information – A. Financial Statements and Other Financial Information – Legal Proceedings”.
Mr. Isaac Israel, Kitov’s CEO, was detained for questioning and subsequently released on the same day, under certain limited
restrictive terms established by a court, as per, what the Company’s outside attorneys have advised us is, standard practice
in such Israeli Securities Authority investigations and enforcement proceedings. On February 9, 2017, the Board of Directors of
Kitov Parent, resolved to approve the payment of one hundred thousand NIS (NIS 100,000), as needed, for the benefit of Mr. Israel,
for the purpose of placing a bond required in order to secure Mr. Israel’s return from overseas travel required in the performance
of his duties as CEO of Kitov Parent. The resolution was adopted, inter alia, in accordance with the letter of indemnification
between Kitov Parent and Mr. Israel presently in effect, and in accordance with Israeli applicable law. To date, Mr. Israel has
not yet traveled out of Israel under a bond placed by Kitov Parent.



We
expect to indemnify our officers and directors for obligations, including the deductibles for our directors and officers liability
insurance policy, they may be required to pay and costs and expenses they may incur related to the ISA Investigation referred
to above and the 2015 Motion, the 2017 Motions and U.S. Class Actions described in Item 8. Financial Information – A. Financial
Statements and Other Financial Information – Legal Proceedings, pursuant to the letters of indemnification issued to our
directors and officers.



Kitov Parent’s audit
committee and board of directors determined that Kitov Parent would indemnify and undertakes in advance to indemnify the officers
provided with letters of indemnity (the "Indemnity Letters"). The Indemnity Letters also received the approval of the
shareholders of Kitov Parent. According to the Indemnity Letters the total accumulative sum of indemnification paid by Kitov Parent
to all the officers in Kitov Parent according to the Indemnity Letter that were issued by Kitov Parent will not exceed a sum equal
to 25% of Kitov Parent’s equity attributed to Kitov Parent’s shareholders according to its latest audited or reviewed
consolidated financial statements, as the case may be, as of the date of indemnification. The payment of the indemnity sum will
not prejudice the Officers right to receive insurance coverage benefits. Once Kitov Parent has paid indemnity sums to its Officers
at the maximum indemnity sum, Kitov Parent will not bear additional indemnity sums unless the payment of these additional sums
is approved by authorized corporate bodies according to the law applicable at the time of payment of the additional indemnity
sums, and subject to an amendment in Kitov Parent’s articles of association, if such is required by applicable law at such
time.





Insofar
as indemnifications for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable.



To
our knowledge, other than with respect to the 2015 Motion, the 2017 Motions, the U.S. Class Actions, and the ISA Investigation,
which are all described further in “Item 8. Financial Information – A. Financial Statements and Other Financial Information
– Legal Proceedings”, there is no pending litigation or proceeding against any of our office holders as to which indemnification
is being, or may be sought, nor are we aware of any other pending or threatened litigation or proceeding that may result in claims
for indemnification by any office holder.



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



As
of December 31, 2016, we had: (i) four consultants and service providers providing management and financial services, including
our chief executive officer, chief financial officer and our chairman of the board, who also fulfills duties and responsibilities
of chief medical officer; (ii) one employee serving as our vice president of business development; (iii) one employee providing
in-house legal services (iv) one employee serving as our office administrator; and (v) two consultants providing research and
development services. As of December 31, 2015 and 2014, we had: (i) four consultants and service providers providing management
and financial services, including our chief financial officer and our chairman of the board, who also fulfills duties and responsibilities
of chief medical officer; (ii) one employee serving as our chief executive officer; (iii) one employee providing in-house legal
services; and (iv) four consultants providing research and development services.





100






While
none of our employees is party to a collective bargaining agreement, in Israel we are subject to certain labor statutes and national
labor court precedent rulings, as well as to certain provisions of the collective bargaining agreements between the Histadrut
(General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations including the Industrialists' Associations.
These provisions of collective bargaining agreements are applicable to our Israeli employees by virtue of extension orders issued
in accordance with relevant labor laws by the Israeli Ministry of Labor and Welfare, and which apply such agreement provisions
to our employees even though they are not directly part of a union that has signed a collective bargaining agreement. The laws
and labor court rulings that apply to our employees principally concern the minimum wage laws, procedures for dismissing employees,
determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick pay and other conditions
for employment. The extension orders which apply to our employees principally concern the requirement for length of the work day
and workweek, mandatory contributions to a pension fund, annual recreation allowance, travel expenses payment and other conditions
of employment. We generally provide our employees with benefits and working conditions beyond the required minimums.



Israeli
law generally requires severance pay, which may be funded by managers' insurance and/or a pension fund described below, upon the
retirement or death of an employee or termination of employment without cause (as defined in the law). Furthermore, Israeli employees
and employers are required to pay predetermined sums to the National Insurance Institute, which is similar to the United States
Social Security Administration. Such amounts also include payments for national health insurance. A general practice also followed
by us is the contribution of funds on behalf of most of our employees either to a fund known as managers' insurance, to a pension
fund or to a combination of both.



We
have never experienced labor-related work stoppages or strikes and believe that our relations with our employees are satisfactory.



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



The
following table sets forth information with respect to the beneficial ownership of Kitov Parent’s ordinary shares as of
April 25, 2017 by:



| | ● | each
    of our directors, executive officers and senior management and employees individually; and
| | - | ---------------------------------------------------------------------------------------------------



| | ● | all
    of our executive officers, directors, and senior management and employees as a group.
| | - | ---------------------------------------------------------------------------------------------



The
beneficial ownership of Kitov Parent’s ordinary shares in this table is determined in accordance with the rules of the SEC.
Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of
or to direct the disposition of the security. For purposes of the table below, we deem ordinary shares of Kitov Parent issuable
pursuant to options or warrants that are currently exercisable or exercisable within 60 days of April 25, 2017, if any, to be
outstanding and to be beneficially owned by the person holding the options or warrants for the purposes of computing the percentage
ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any
other person. The percentage of ordinary shares beneficially owned is based on 164,529,696 ordinary shares of Kitov Parent’s
issued and outstanding as of April 25, 2017 (not including 21 shares held in treasury).





101






|                                                   |  | Ordinary Shares
 Beneficially Owned |          
|-------------------------------------------------- |  | ----------------------------------- | ---------
|Name of Beneficial Owner                           |  | Number                              |          
|Directors                                          |  |                                     |          
|John Paul Waymack(1)                               |  |                                     | 3,214,969
|Isaac Israel(2)                                    |  |                                     | 15,385   
|Simcha Rock(3)                                     |  |                                     | 99,148   
|Steven Steinberg                                   |  |                                     | 0        
|Ido Agmon                                          |  |                                     | 0        
|Arye Weber                                         |  |                                     | 0        
|Ran Tzror                                          |  |                                     | 0        
|Revital Stern-Raff                                 |  |                                     | 0        
|                                                   |  |                                     |          
|Senior Management and Employees                    |  |                                     |          
|Gil Ben-Menachem(4)                                |  |                                     | *        
|Avraham Ben-Tzvi(5)                                |  |                                     | *        
|Hadas Reuveni(6)                                   |  |                                     | 0        
|                                                   |  |                                     |          
|Total (directors, senior management and employees) |  |                                     | 3,478,794



*
Less than 1%



|(1) | Includes
    2,184,431 ordinary shares held directly by JPW PCH LLC, a Virginia limited liability company, owned 51% by Dr. John Paul Waymack,
    and 30,538 ordinary shares held directly by Dr. John Paul Waymack, and Series A warrants to purchase 50,000 ADS (representing
    1,000,000 of our ordinary shares), that are currently exercisable, which are held by Dr. Waymack and some of his immediate
    family members who are minors. The number of shares set forth in the table as beneficially owned by Dr. Waymack, does not
    include 1,389,456 ordinary shares issuable upon exercise of outstanding options, which, while vested on a time-based vesting
    basis, are as of April 25, 2017 not necessarily exercisable within 60 days due to the required fulfillment of certain other
    contingencies and clawback provisions April 25, 2017 under the terms of the grants. Dr. John Paul Waymack may be deemed to
    beneficially own all of the shares held directly by JPW PCH LLC. To the best of our knowledge, and as informed to us by Dr.
    John Paul Waymack, Dr. Waymack has irrevocably assigned to an unaffiliated minority shareholder of JPW PCH LLC, any of the
    decision making with respect to any acquisitions or dispositions by JPW PCH LLC of any of our securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The
    number of shares set forth in the table as beneficially owned by Mr. Israel, does not include 551,619 ordinary shares issuable
    upon exercise of outstanding options currently exercisable, which, while vested on a time-based vesting basis, are as of April
    25, 2017 not necessarily exercisable within 60 days due to the required fulfillment of certain other contingencies and clawback
    provisions under the terms of the grants.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes
    91,455 ordinary shares issuable upon exercise of outstanding options currently exercisable. The exercise price of these options
    is NIS 10.40 per share and the options expire in July 2017. The number of shares set forth in the table as beneficially owned
    by Mr. Rock, does not include 165,486 ordinary shares issuable upon exercise of outstanding options currently exercisable,
    which, while vested on a time-based vesting basis, are as of April 25, 2017 not necessarily exercisable within 60 days due
    to the required fulfillment of certain other contingencies and clawback provisions under the terms of the grants.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Includes
    ordinary shares issuable upon exercise of outstanding options currently exercisable comprising less than 1% of Kitov Parent’s
    ordinary shares.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Includes
    ordinary shares as well as ordinary shares issuable upon exercise of outstanding options currently exercisable comprising
    less than 1% of Kitov Parent’s ordinary shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2016
Equity-Based Incentive Plan



On
April 18, 2016, we adopted the Kitov Pharmaceutical Holdings Ltd. 2016 Equity-Based Incentive Plan, or the 2016 Equity Incentive
Plan. The 2016 Equity Incentive Plan provides for the granting to our directors, officers, employees and consultants and to the
directors, officers, employees and consultants of our subsidiaries and affiliates, of equity-based incentive awards, including,
amongst others, options, restricted share units (RSUs), restricted shares, with either ordinary shares of Kitov Parent or Company
ADSs underlying the applicable award. The 2016 Equity Incentive Plan provides for awards to be granted at the determination of
Kitov Parent’s board of directors (who is entitled to delegate its powers under the 2016 Equity Incentive Plan to the compensation
committee or audit committee of Kitov Parent’s board of directors) in accordance with applicable laws. The exercise price
and vesting period of awards are determined by Kitov Parent’s board of directors. The initial number of ordinary shares
reserved for the grant of awards under the 2016 Equity Incentive Plan is 12,000,000 ordinary shares, or the equivalent number
of ADSs representing such number of Kitov Parent’s ordinary shares (presently, at the ratio of 20 ordinary shares to 1 ADS,
such number is equal to 600,000 ADSs). Kitov Parent’s board of directors may, subject to any other approvals required under
any applicable law, increase or decrease the number of ordinary shares to be reserved under the 2016 Equity Incentive Plan. As
of April 25, 2017 there were non-tradable options exercisable into 9,750,130 ordinary shares issuable upon the exercise of outstanding
options under the 2016 Equity Incentive Plan (such number of ordinary shares would comprise 487,507 of Kitov Parent’s ADSs).





102






The
2016 Equity Incentive Plan will be effective until the earliest of (a) its cancellation by the board of directors of Kitov Parent
and (b) April 18, 2026. Nevertheless, awards granted prior to the 2016 Equity Incentive Plan’s expiration date, whether
vested or not vested up to that date, will remain effective and will not expire prior to their expiration date as set forth in
the notice of grant of award (but in any event not in excess of 10 (ten) years from the allocation date).



Upon
termination of engagement with the Company for any reason, other than in the event of death or for cause, all unvested options
will expire and all vested options at time of termination will generally be exercisable within up to twelve (12) months after
the date of such termination, unless otherwise determined by the board of directors (or the committee, as applicable), subject
to the terms of the 2016 Equity Incentive Plan and the governing award agreement. If we terminate a grantee for cause (as defined
in the 2016 Equity Incentive Plan) the grantee’s right to exercise all vested and unvested options granted to him will expire
immediately, unless otherwise determined by the board of directors (or the committee, as applicable). Upon termination of engagement
with the Company due to death, all the vested options at the time of termination will be exercisable by the grantee’s heirs
or estate, for one (1) year from the date of death, unless otherwise determined by the board of directors (or the committee, as
applicable), subject to the terms of the 2016 Equity Incentive Plan and the governing award agreement.



The
2016 Equity Incentive Plan enables us to grant awards through one of the following Israeli tax programs, at our discretion and
subject to the applicable legal limitations: (a) according to section 102 of the Israeli Income Tax Ordinance, through a program
with a trustee that is appointed by us, (b) according to section 102 of the Israeli Income Tax Ordinance, without a trustee, or
(c) according to the provisions of section 3(9) in the Israeli Income Tax Ordinance. The 2016 Equity Incentive Plan also enables
us to grant options as Incentive Stock Options for U.S. tax purposes.



The
2016 Equity Incentive Plan includes directives for protecting the option holders during the exercise period with respect to distribution
of bonus stock, issue of rights, splitting or consolidating our share capital and dividend distribution. We will be entitled at
our sole discretion, to change the terms of the 2016 Equity Incentive Plan and/or replace it and/or terminate it regarding future
grants at any time, as we deem appropriate. It is also clarified that we will be entitled to change the terms of 2016 Equity Incentive
Plan regarding grants that were granted to the grantees, provided that the terms of the options which were already granted will
not be changed in a way that may materially impair the rights of the grantees, without the consent of award grantees holding a
majority in interest of the awards so affected, and in the event that such consent is obtained, all awards so affected shall be
deemed amended, and the holders thereof shall be bound, as set forth in such consent. Kitov Parent’ board of directors will
determine, at its sole discretion, if a certain change may materially impair the rights of the grantee.



In
May 2016, Kitov Parent received from the Securities Authority of the State of Israel an exemption from prospectus requirements
pursuant to the prevailing laws of the State of Israel, with respect to the offering of any securities of Kitov Parent issuable
pursuant to the 2016 Equity Incentive Plan, In accordance with the terms of such exemption, in lieu of Kitov Parent filing an
outline of offering in connection with the 2016 Equity Incentive Plan, Kitov Parent will provide without charge to each award
grantee in Israel, upon the oral or written request of such person, Hebrew translations of the Registration Statement on Form
S-8 filed in connection with the 2016 Equity Incentive Plan and the 2016 Equity Incentive Plan.



Administration
of the 2016 Equity Incentive Plan



The
2016 Equity Incentive Plan is administered by Kitov Parent’s board of directors, regarding the granting of awards and the
terms of award grants, including exercise price, method of payment, vesting schedule, acceleration of vesting and the other matters
necessary in the administration of such plans. Awards granted under the 2016 Equity Incentive Plan to eligible Israeli employees,
officers and directors and which are granted under Section 102 of the Israel Income Tax Ordinance pursuant to which the awards
or the ordinary shares (or ADSs in accordance with a ruling from the Israel Tax Authority dated June 19, 2016, or Tax Ruling)
issued upon their exercise must be allocated or issued to a trustee and be held in trust for two years from the date upon which
such awards were granted in order to benefit from the provisions of Section 102. Under Section 102, any tax payable by an grantee
from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares (or ADSs; in accordance
with the Tax Ruling) by the trustee to the grantee or upon the sale of the awards or ordinary shares (or ADSs in accordance with
the Tax Ruling), and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance with specified
conditions.





103






2013
Option Plan



On
November 27, 2013, Kitov Parent adopted the 2013 Kitov Pharmaceutical Holdings Ltd. Stock Option Allocation Plan, or the 2013
Option Plan. The 2013 Option Plan provides for the granting of options to our directors, officers, employees and consultants and
to the directors, officers, employees and consultants of our subsidiaries and affiliates. The 2013 Option Plan provides for options
to be granted at the determination of Kitov Parent’s board of directors (who is entitled to delegate its powers under the
2013 Option Plan to Kitov Parent’s compensation committee) in accordance with applicable laws. The exercise price and vesting
period are determined by Company’s board of directors. As of April 25, 2017, there were 1,833,753 non-tradable options exercisable
into 182,393 ordinary shares issuable upon the exercise of outstanding options under the 2013 Option Plan.



The
2013 Option Plan will be effective until the earliest of (a) its cancellation by Kitov Parent’s board of directors and (b)
October 31, 2023. Nevertheless, options granted up to the 2013 Option Plan’s expiration date, whether vested or not vested
up to that date, will remain effective and will not expire prior to their expiration date (within 10 (ten) years from the allocation
date).



Upon
termination of employment for any reason, other than in the event of death or for cause, all unvested options will expire and
all vested options at time of termination will generally be exercisable for 90 days following termination, subject to the terms
of the 2013 Option Plan and the governing option agreement. If we terminate a grantee for cause (as defined in the 2013 Option
Plan) the grantee’s right to exercise all vested and unvested the options granted to him will expire immediately. Upon termination
of employment due to death, all the vested options at the time of termination will be exercisable by the grantee’s heirs
or estate, for twelve (12) months from the latest of: (i) death or (ii) option expiration date, subject to the terms of the 2013
Option Plan and the governing option agreement.



The
2013 Option Plan enables us to grant options through one of the following tax programs, at our discretion and subject to the applicable
legal limitations: (a) according to section 102 of the Israeli Income Tax Ordinance, through a program with a trustee that is
appointed by us or (b) according to the provisions of section 3(i) in the Israeli Income Tax Ordinance.



The
2013 Option Plan includes directives for protecting the option holders during the exercise period with respect to distribution
of bonus stock, issue of rights, splitting or consolidating our share capital and dividend distribution. We will be entitled at
our sole discretion, to change the terms of the 2013 Option Plan and/or replace it and/or terminate it regarding future grants
at any time, as we deem appropriate. It is also clarified that we will be entitled to change the terms of 2013 Option Plan regarding
grants that were granted to the grantees, provided that the terms of the options which were already granted will not be changed
in a way that may materially impair the rights of the grantees, without the consent of the grantees. Kitov Parent’s board
of directors will determine, at its sole discretion, if a certain change may materially impair the rights of the grantee.



Without
limiting the foregoing, in every case of a material event whereby (i) Kitov Parent will become a private company with shares no
longer be traded on a stock exchange; (ii) there occurs a restructuring, including merger transaction in which Kitov Parent is
not the surviving corporation or as a result of which there is a change in control; (iii) there occurs an arrangement between
Kitov Parent and its creditors and/or shareholders and/or option holders; (iv) there occurs the sale of all or a substantial part
of Kitov Parent’s assets; or (v) there occurs a liquidation of Kitov Parent, Kitov Parent’s board of directors, in
its sole discretion, may adjust and change the terms of the options according to the plan for all the grantees or to certain grantees,
in its sole discretion, including by (i) accelerating the vesting period of unvested options and (ii) replacing vested options
with securities of the purchaser or any party related to the purchaser or other compensation to the grantee. Unless otherwise
determined by the board of directors, non-vested options will expire soon before the material event or will be exercised, according
to the decision of the board of directors. The board of directors will have the right to require the grantees to exercise all
the vested options, soon before the occurrence of the material event and any option that will not be exercised will expire and
will be devoid of any value.





104






Administration
of Our 2013 Option Plan



Our
2013 Option Plan is administered by Kitov Parent’s board of directors, regarding the granting of options and the terms of
option grants, including exercise price, method of payment, vesting schedule, acceleration of vesting and the other matters necessary
in the administration of these plans. Options granted under the 2013 Option Plan to eligible Israeli employees, officers and directors
are granted under Section 102 of the Israel Income Tax Ordinance pursuant to which the options or the ordinary shares issued upon
their exercise must be allocated or issued to a trustee and be held in trust for two years from the date upon which such options
were granted in order to benefit from the provisions of Section 102. Under Section 102, any tax payable by an employee from the
grant or exercise of the options is deferred until the transfer of the options or ordinary shares by the trustee to the employee
or upon the sale of the options or ordinary shares, and gains may qualify to be taxed as capital gains at a rate equal to 25%,
subject to compliance with specified conditions.



Form
S-8 registration statements



On
May 20, 2016 Kitov Parent filed a registration statement on Form S-8 under the Securities Act to register 12,000,000 ordinary
shares of Kitov Parent issued or reserved to be issued under our 2016 Equity Incentive Plan. We intend to file one or more additional
registration statements on Form S-8 under the Securities Act to register ordinary shares of Kitov Parent issued or reserved to
be issued under the 2016 Equity Incentive Plan. The registration statements on Form S-8 become effective automatically upon filing.
Ordinary shares issued upon exercise of a share option or other award and registered pursuant to the Form S-8 registration statement
will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the
open market immediately unless they are subject to the 180-day lock-up or, if subject to the lock-up, immediately after the 180-day
lock-up period expires.



|ITEM7. | MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------ | -----------------------------------------------------



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



The
following table sets forth information with respect to the beneficial ownership of Kitov Parent’s ordinary shares as of
April 25, 2017 by each person or entity known by us to own beneficially more than 5% of Kitov Parent’s outstanding ordinary
shares.



The
beneficial ownership of Kitov Parent’s ordinary shares in this table is determined in accordance with the rules of the SEC.
Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of
or to direct the disposition of the security. For purposes of the table below, we deem ordinary shares issuable pursuant to options
or warrants that are currently exercisable or exercisable within 60 days of April 25, 2017, if any, to be outstanding and to be
beneficially owned by the person holding the options or warrants for the purposes of computing the percentage ownership of that
person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. The
percentage of ordinary shares beneficially owned is based on 164,529,696 ordinary shares (not including 21 shares held in treasury).
The data presented is based on information provided to us by the holders, or disclosed in
public regulatory filings in the U.S. or Israel, in accordance with the applicable law.



None
of our shareholders has different voting rights from other shareholders. To the best of our knowledge, we are not owned or controlled,
directly or indirectly, by another corporation or by any foreign government. We are not aware of any arrangement that may, at
a subsequent date, result in a change of control of our company. Unless otherwise noted below, all references to “ordinary
shares” refers to ordinary shares of Kitov Parent.





105






|                                                   |  | Shares Beneficially Owned |           
|-------------------------------------------------- |  | ------------------------- | ----------
|Name of Beneficial Owner                           |  | Number                    |           
|5% or greater shareholders                         |  |                           |           
|                                                   |  |                           |           
|Goldman Hirsh Partners Ltd./Dr. Gil Pogozelich (1) |  |                           | 11,292,508





|(1) | On
    January 13, 2017, we issued 11,292,508 ordinary shares to Katzenell Dimant Trustees Ltd. as trustee holding such shares
    in escrow on behalf of us and Goldman Hirsh Partners Ltd. (GHP), a privately owned Israeli company. The ordinary shares were
    issued as part of the consideration paid to GHP for the sale to us of its holdings in TyrNovo Ltd. The ordinary shares were
    issued on a private placement basis in Israel pursuant to exemptions from the prospectus requirements under applicable Israeli
    securities laws and from the registration requirements of the United States Securities Act of 1933, as amended. GHP has signed
    a Shareholder’s Undertaking in connection with the ordinary shares containing, amongst other matters, a prohibition
    on transfer of such ordinary shares until January 13, 2018 and certain standstill limitations. GHP agreed to vote its ordinary
    shares, subject to certain exceptions relating to significant corporate transactions, in accordance with the recommendation
    of our board of directors and in favor of persons nominated and recommended to serve as directors by the board, and has granted
    us a proxy to ensure GHP’s compliance with such voting undertakings. It is our understanding, to the best of our knowledge,
    that GHP is controlled by Dr. Gil Pogozelich, an Israeli citizen and resident.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Except
as indicated in footnotes to this table, we believe that the shareholders named in this table have sole voting and investment
power with respect to all shares shown to be beneficially owned by them, based on information provided to us by such shareholders.



Changes
in Percentage Ownership by Major Shareholders



Goldman
Hirsch Partners Ltd.



On
January 12, 2017, Kitov Parent acquired a controlling equity stake in TyrNovo Ltd. from Goldman Hirsch Partners Ltd. (GHP), its
majority shareholder, for consideration of USD 2 million in cash and 11,292,508 ordinary shares of Kitov Parent, equivalent to
USD 1.8 million based on the closing price of Kitov Parent’s ordinary shares on the TASE on January 11, 2017. At closing
of the transaction, on January 13, 2017 Kitov Parent issued 11,292,508 ordinary shares to Katzenell Dimant Trustees Ltd.
as trustee holding such shares in escrow on behalf of Kitov Parent and GHP. The ordinary shares were issued on a private placement
basis in Israel pursuant to exemptions from the prospectus requirements under applicable Israeli securities laws and from the
registration requirements of the United States Securities Act of 1933, as amended. GHP has signed a Shareholder’s Undertaking
in connection with the ordinary shares containing, amongst other matters, a prohibition on transfer of such ordinary shares until
January 13, 2018 and certain standstill limitations. Pursuant to such undertaking, GHP has agreed to vote its ordinary shares,
subject to certain exceptions relating to significant corporate transactions, in accordance with the recommendation of our board
of directors and in favor of persons nominated and recommended to serve as directors by the board, and has granted Kitov Parent
a proxy to ensure GHP’s compliance with such voting undertakings.



Mr.
Sheer Roichman / Haiku Capital Ltd.



As
reported on the Schedules 13G filed on June 1, 2016 by Mr. Sheer Roichman and Haiku Capital Ltd., a
company wholly-owned by Mr. Roichman, as of such date Haiku Capital beneficially owned 221,020 ordinary shares and held options
issued by us to Haiku Capital representing the right to purchase 400,000 ordinary shares, and Mr.Sheer Roichman beneficially
owned 2,473,780 ordinary shares.





106






As
reported on the Schedules 13G previously filed by Mr. Sheer Roichman and Haiku Capital, Mr. Roichman acquired beneficial ownership
of 7,506,060 of our ordinary shares via the acquisition in our November 2015 initial public offering in the U.S. by Haiku Capital
of ADSs representing such number of ordinary shares. At such time Haiku Capital also purchased public warrants representing the
right to purchase 375,303 American Depositary Shares representing 7,506,060 of our Ordinary Shares, which are not currently exercisable.
Subsequent to our initial U.S. public offering, Mr. Roichman acquired beneficial ownership of an additional 3,330,901 of our ordinary
shares via open market purchases (of our ordinary shares on the TASE and our ADSs on NASDAQ) by Mr. Roichman directly (2,664,060ordinary shares comprising such additional holdings) and by Haiku Capital (666,841 ordinary shares comprising such additional
holdings). Prior to the initial U.S. public offering Haiku Capital owned options currently exercisable representing the right
to purchase 400,000 of our ordinary shares. To the best of our knowledge, other than these 400,000 options, Mr. Roichman had no
beneficial ownership over any other of our securities immediately prior to the initial U.S. public offering.



Prior
to the Share Transfer Agreement with Kitov Pharmaceuticals dated July 11, 2013, Mr. Roichman and Haiku Capital were the controlling
shareholders of Kitov Parent (then called Mainrom Line Logistics Ltd.). At the closing of the Share Transfer Agreement with Kitov
Pharmaceuticals dated July 11, 2013, Mr. Roichman was the beneficial owner of 3,083,983 of Kitov Parent’s ordinary shares
(prior to a 1-for-13 reverse stock split of our outstanding share capital, which we completed in November 2014) which represented
12.07% of the issued and outstanding share capital at such time. After a series of off-exchange transactions as well as direct
sales on the TASE, Mr. Roichman ceased to be a significant shareholder of Kitov Parent in April 2014.



Dr.
John Paul Waymack



Immediately
prior to our initial U.S. public offering, Dr. John Paul Waymack had beneficial ownership of 1,111,721 of Kitov Parent’s
ordinary shares which represented 8.58% of its issued and outstanding share capital at the time. Such amount included 1,081,183
ordinary shares held directly by JPW PCH LLC, a Virginia limited liability company, owned 51% by Dr. John Paul Waymack and 30,538
ordinary shares held directly by Dr. John Paul Waymack. Dr. John Paul Waymack may be deemed to beneficially own all of the shares
held directly by JPW PCH LLC. In December 2015, we issued 1,103,248 of Kitov Parent’s ordinary shares to JPW PCH LLC, as
a result of the attainment of the milestone in connection with our Phase III clinical trial for KIT-302. (see “Item 7. Major
Shareholders and Related Party Transactions – B. Related Party Transactions – Share Transfer Agreement with Kitov
Pharmaceuticals"). Dr. Waymack’s holdings were reduced below 5% of Kitov Parent’s issued and outstanding share
capital as a result of our initial U.S. public offering.



Dexcel
Ltd.



Immediately
prior to our initial U.S. public offering, Dexcel Ltd. a private company wholly owned by Dexon Holdings Ltd. which is a private
company wholly owned by Mr. Dan Oren who may be deemed to beneficially own all of the shares held directly by Dexcel Ltd., was
known to us to have owned 755,294 of our ordinary shares which represented 5.83% of our issued and outstanding share capital at
the time. These shares were issued to Dexcel Ltd. pursuant to the achievement of milestones under our Development Services Agreement
with Dexcel Ltd. 157,783 ordinary shares were issued at the first tranche. Upon completion of a milestone the second tranche of
597,511 ordinary shares was issued in May 2015. Dexcel Ltd.’s holdings were reduced below 5% of our issued and outstanding
share capital as a result of our initial U.S. public offering in November 2015.



Record
Holders



As
of the date of this Annual Report on Form 20-F, there were (i) three shareholders of record of our ordinary shares, one of which
was a U.S. entity holding 0.4% of our ordinary shares and two of which were Israeli entities holding 99.6% of our ordinary shares;
and (ii) one holder of record for the public warrants which was a U.S. entity. As of April 20, 2017, there were 4,257,157 ADSs
outstanding (equivalent to 85,143,140 ordinary shares, or approximately 51.75% of our total issued and outstanding ordinary shares),
which were held by 62 holders of record as recorded on the records of Depositary Trust Corporation and our ADS Depositary, The
Bank of New York Mellon.



The
number of record holders is not representative of the number of beneficial holders of our ADSs, ordinary shares, and our warrants
because many of the ADSs, ordinary shares and our warrants are held by brokers or other nominees. Other than with respect to certain
restricted shares or ADS containing a legend, the shares for a publicly traded company such as ours, which is listed on the TASE
(and with ADSs listed on the NASDAQ), are generally recorded in the name of our Israeli share registrar, Registration Company
of United Mizrahi Bank Ltd. or in the name of our ADS Depositary, The Bank of New York Mellon.





107






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



TyrNovo
Ltd.



On
January 13, 2017,Kitov Parent completed
its acquisition of acontrolling interest in TyrNovo, from GHP. Pursuant to the terms of the transaction, including such
adjustments to the terms and conditions which were finalized between the parties subsequent to the closing, Kitov Parent issued
GHP 11,292,508 of its ordinary shares (the “Consideration Shares”) and will pay GHP aggregate cash proceeds of $2
million (the “Cash Consideration”) in exchange for 9,570 ordinary shares in TyrNovo and the assignment to Kitov Parent
of a loan in the amount of $101,157 made by GHP to TyrNovo, (the “Completed TyrNovo Acquisition”). $800,000 of the
Cash Consideration was paid to GHP (or to other third parties on behalf of GHP) on January 13, 2017. An additional $1,032,843
of the Cash Consideration was paid to GHP (or to other third parties on behalf of GHP) in April 2017. The remaining $167,157 of
the Cash Consideration is being held back by Kitov Parent pending the fulfillment of certain conditions as agreed to between Kitov
Parent and GHP. As part of the Completed TyrNovo Transaction, and following the arrangements for the payment of the additional
Cash Consideration in April 2017, Kitov Parent agreed with GHP that it also acquired a loan to TyrNovo of $101,157 from GHP. The
repayment date and other terms of such acquired loan have not been determined.



All
of the Consideration Shares are being held in escrow in order to ensure the fulfillment of certain post-closing undertakings and
to satisfy indemnification claims and other liabilities the Company may become subject to as a result of the Completed TyrNovo
Acquisition. Kitov Parent announced that it may acquire additional equity stakes in TyrNovo from TyrNovo’s
minority shareholders, which include employees and consultants of TyrNovo, in exchange for additional ordinary shares of Kitov
Parent, in amounts to be determined with such shareholders. Concurrent with the closing of the Completed TyrNovo Acquisition,
on January 13, 2017 GHP resigned from its position as sole director of TyrNovo Ltd.



On
January 13, 2017, GHP signed a Shareholder’s Undertaking in connection with the ordinary shares of Kitov Parent held by
GHP containing, amongst other matters, a prohibition on transfer of such ordinary shares until January 13, 2018 and certain standstill
limitations. GHP has agreed to vote its ordinary shares, subject to certain exceptions relating to significant corporate transactions,
in accordance with the recommendation of Kitov Parent’s board of directors and in favor of persons nominated and recommended
to serve as directors by the board, and has granted Kitov Parent a proxy to ensure GHP’s compliance with such voting undertakings.



On
January 16, 2017, in connection with the Completed TyrNovo Acquisition, Mr. Simcha Rock, Kitov Parent’s chief financial
officer, was appointed as a director of TyrNovo Ltd.



On
January 19, 2017, the Tel Aviv District Court (Economic Division) issued a temporary interlocutory injunction (the “Injunction”),
in response to a motion filed on January 19, 2017 by Taoz – Company for Management and Holdings of Companies Ltd. (“Taoz”),
a shareholder owning 534 shares (then representing approximately 3.12%) of TyrNovo(hereinafter,
the “Motion”). The Motion was filed ex parte againstKitov Parent,
TyrNovo, GHP and Katzenell Dimant Trustees Ltd., the escrow agent with respect to the Consideration Shares which are required
to be held in escrow subsequent to closing in accordance with the terms of the Completed TyrNovo Acquisition.Taoz filed
the Motion, alleging certain rights as a minority shareholder in TyrNovo and contractual rights with GHP pursuant to a non-binding
term sheet executed on July 11, 2016 by and among Taoz, TyrNovo, and GHP. In the Injunction, the Court enjoined Kitov Parent and
GHP from continuing with any actions to complete the Completed TyrNovo Acquisition, but only to the extent that the Completed
TyrNovo Transaction had not yet closed. The Court rejected the Motion with respect to all the additional temporary interlocutory
injunctive relief sought by Taoz.



On
February 9, 2017, Kitov Parent, TyrNovo and Taoz entered into a settlement arrangement in connection with the Motion, which was
approved by the Board of Directors of Kitov Parent, pursuant to which the following agreements were signed:



| | 1) | A
    Waiver and Release Agreement among Kitov Parent, TyrNovo and Taoz pursuant to which the parties agreed, amongst other matters,
    to:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------



| | i. | Taoz’s
    consent to dismiss with prejudice any and all proceedings against Kitov Parent and TyrNovo in connection with the Motion;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------





108






| | ii. | mutual
    settlement with respect to court costs;
| | --- | --------------------------------------------------



| | iii. | a
    grant by Taoz of an irrevocable waiver and release to Kitov Parent and TyrNovo, as well as their respective affiliated parties
    for any and all damages Taoz may, now or in the future, have against them in connection with the Completed TyrNovo Acquisition;
    and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | an
    irrevocable waiver by Kitov Parent to Taoz for any claims and/or demands it may, now or in the future, have against Taoz and/or
    any director of TyrNovo nominated by Taoz, for any acts or omissions by TyrNovo during the period of time preceding the execution
    of Waiver and Release Agreement.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | A
    Binding Term Sheet between TyrNovo, Taoz and Kitov Parent pursuant to which the parties agreed, amongst other matters,
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| | i. | that
    Taoz is entitled to be issued an additional 77 ordinary shares of TyrNovo, representing 0.4% of the issued and outstanding
    share capital of TyrNovo immediately following this issuance, within thirty (30) days from February 9, 2017;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | that
    Taoz shall have the right during a period commencing upon February 9, 2017 and ending upon the earlier of: (1) the lapse of
    60 days from the day on which TyrNovo notifies Taoz in writing, of a notice by the board of TyrNovo (a “Milestone Notice”)
    stating that a U.S. FDA approval to commence a Phase I clinical trial has been obtained, or; (2) 30 months from February 9,
    2017, to invest an additional US$750,000 (the “Deferred Investment”) to be provided to TyrNovo by way of a convertible
    loan; the principal amount of the convertible loan shall bear interest at a rate per annum of LIBOR + 6% in the event of US$
    loans, and Prime + 6% in the event of NIS loans, compounded annually, from the date on which Taoz made the loan and until
    the date of conversion or repayment thereof; repayment of the loan amount shall be made, unless automatically converted prior
    to the Repayment Date, upon the earliest of: (a) 6 months following the date of the publication by TyrNovo of the official
    results of the Phase I clinical trials; (b) 36 months from the date of first transfer to TyrNovo by Taoz of the funding under
    the Convertible Loan; (c) immediately prior to an Exit Event (defined as either a qualified initial public offering of TyrNovo
    or the consummation of a merger or sale of all or substantially all of TyrNovo’s assets or share capital); or (d) an
    Event of Default (as defined in the Binding Term Sheet); the earliest of the events detailed above are referred to as the
    "Repayment Date"; in the event that prior to the Repayment Date TyrNovo shall raise additional funds in an amount
    of not less than US$1,000,000 in consideration for shares of TyrNovo from an investor who is not, on February 9, 2017, a shareholder
    in TyrNovo (the "Next Financing Round"), then, immediately prior to the Next Financing Round, the loan amount shall
    automatically convert into ordinary shares of TyrNovo at a price per share which shall be the lower of (i) a price per share
    reflecting a 30% discount off the price per share paid in the Next Financing Round by the investor and (ii) a price per TyrNovo
    share reflecting a TyrNovo company valuation of $13,500,000 divided by the number of issued and outstanding shares of TyrNovo
    as of February 9, 2017; during the period commencing 14 days before the Repayment Date and ending 7 days before the Repayment
    Date, provided that the loan amount was not converted automatically as set forth above, the lender may, at its election, convert
    the loan amount into ordinary shares of TyrNovo at a loan conversion price equal to a price per TyrNovo share reflecting a
    TyrNovo company valuation of $13,500,000 divided by the number of issued and outstanding shares of TyrNovo as of February
    9, 2017;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | that
    upon issuance of preferred shares by TyrNovo in the future, each of Taoz and/or Kitov Parent shall have the right, only upon
    the first time that TyrNovo issues such preferred shares, to notify TyrNovo that it wishes to convert all ordinary TyrNovo
    shares issued to Taoz under the Binding Term Sheet and the TyrNovo ordinary shares held by Kitov Parent in an amount not exceeding
    twice the number of TyrNovo shares initially acquired by Taoz, or converted by Taoz by virtue of the conversion as set forth
    in clause ii. above, into such preferred shares, provided that the preference with respect to each preferred share of Taoz
    and Kitov Parent shall be equal to the actual purchase price for which these TyrNovo shares were issued;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





109






| | iv. | to
    an option granted to Taoz to invest in TyrNovo in an amount of up to US$1,000,000 for TyrNovo ordinary shares, pursuant to
    a convertible loan which may be exercised until the earlier of (1) the lapse of 30 months from February 9, 2017; (2) an Exit
    Event or (3) the lapse of 60 days following TyrNovo’s Milestone Notice;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | to
    the grant to Taoz of certain director appointment rights with respect to the board of directors of TyrNovo until the earlier
    of (1) such time in which the option set forth in item (iv) above is exercised or expired and is no longer exercisable and
    the shares in TyrNovo held by Taoz constitute less than 8.9% of the issued and outstanding share capital of TyrNovo (including
    a mechanism for calculating the conversion of any convertible loans for the purposes of this threshold); and (2) immediately
    prior to an Exit Event;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | that
    until an Exit Event, the grant to Taoz of registration rights for its TyrNovo shares upon grant by TyrNovo in the future of
    registration rights to any of its shareholders with respect to securities of TyrNovo, under the same terms and conditions,
    and in accordance with the same registration rights agreement(s), that such right was granted to such other shareholder(s)
    of TyrNovo; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vii. | that
    until an Exit Event, and notwithstanding the higher threshold set forth under TyrNovo’s Articles of Association currently
    in effect, Taoz shall have the right to purchase its pro rata share of Additional Securities (as defined in the Binding Term
    Sheet) that TyrNovo may, from time to time, propose to sell and issue.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | A
    Shareholders Agreement between Kitov Parent and Taoz, including, amongst others, the following matters:
| | -- | -------------------------------------------------------------------------------------------------------------



| | i. | an
    undertaking by Kitov Parent to finance any future working capital requirement of TyrNovo, up to an amount of $1,000,000, of
    which the amount of $750,000 shall be provided to TyrNovo no later than 30 days from February 9, 2017, and $250,000 pursuant
    to a business plan to be approved by the Board of Directors of TyrNovo no later than May 9, 2017, and such financing by Kitov
    Parent shall be provided by way of Convertible Loan (as defined in the Binding Term Sheet);
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | in
    the event that the Milestone (as defined in the Binding Term Sheet) is achieved, and Taoz did not invest the Deferred Investment
    then Kitov Parent shall have the right, for a period of 60 days, to acquire all of the Taoz's holdings in TyrNovo at a price
    per share of US$476.48;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | in
    the event that Kitov Parent increases its shareholdings in TyrNovo, through the purchase of additional shares from TyrNovo’s
    then current shareholders, by more than 1,500 shares of TyrNovo until February 9, 2018, then Taoz shall have the option within
    14 days of the notification by Kitov Parent of such purchases to purchase up to 30% of such newly acquired shares in TyrNovo,
    and if it does so elect, Taoz shall be obligated to purchase from Kitov Parent, within a period of 12 months of delivery to
    Kitov Parent of the notice of such election, such shares so elected to acquire at the New Shares PPS (as defined below); and,
    in the event Taoz fails to purchase such shares it so elected to acquire from Kitov Parent, Taoz shall immediately transfer
    to Kitov Parent, as liquidated damages, for no consideration to be paid
    by Kitov Parent, such number of securities equal to 20% of the amount of the shares it so elected to acquire from Kitov Parent
    and which Taoz has failed to purchase, out of the shares in TyrNovo then held by Taoz; the "New Shares PPS" shall
    mean, (1) in the event that the newly acquired TyrNovo shares are purchased by Kitov Parent, in whole or in part, in consideration
    for shares of Kitov Parent, then during a period of six months from the acquisition date by Kitov Parent, an amount, in cash
    equal to US$350 per TyrNovo share, and during a period commencing as of the lapse of six months and until the lapse of 12
    months from the acquisition date by Kitov Parent, an amount, in cash equal to US$403 per TyrNovo share, and (2) in the event
    that all the newly acquired TyrNovo shares are purchased by Kitov Parent for cash consideration only, then an amount, in cash,
    equal to 104% of the price per TyrNovo share actually paid by Kitov Parent as consideration for such TyrNovo shares;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





110






| | iv. | until
    an Exit Event, Taoz shall have a right of first refusal with respect to any transfer by Kitov Parent (or a permitted transferee
    thereof) of its shares in TyrNovo up to its Pro Rata Share (as defined in the Binding Term Sheet);
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | until
    an Exit Event, in the event that Taoz did not purchase the offered shares under the right of first refusal as set forth above,
    Taoz shall have a right to participate in such transfer, by selling up to its Pro Rata Share of the TyrNovo shares proposed
    to be sold by Kitov Parent, on the same terms and conditions, for receipt of the same type of consideration, provided that
    such transfer is completed by Kitov Parent;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | until
    the earliest of (1) the lapse of 30 months from February 9, 2017; (2) the execution of investment agreements by TyrNovo with
    an external non-affiliated investor (other than Kitov Parent or company controlled by Kitov Parent), according to which TyrNovo
    shall issue 10% or more of its issued share capital immediately prior to such issuance, (3) immediately prior to an Exit Event,
    or (4) the lapse of 60 days following TyrNovo's Milestone Notice, Kitov Parent shall not make any transfer of shares in TyrNovo,
    except for up to 15% of the issued share capital of TyrNovo or a transfer to a Permitted Transferee (as defined in the agreement);
    and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vii. | Kitov
    Parent provides to Taoz a put option to sell to Kitov Parent up to 50% of the TyrNovo shares issued to Taoz through its investments
    in TyrNovo as set forth in the Binding Term Sheet, or of any shares actually acquired by Taoz from Kitov Parent in accordance
    with item (iii) above, exercisable during a period of 90 days from the publication by TyrNovo of the results of the Phase
    I clinical trials, for a price per TyrNovo share equal to US$1,600, which subject to receipt by Kitov Parent of an exercise
    notice from Taoz, such price shall be paid, 40 days after the delivery of the exercise notice, and subject to all required
    regulatory and corporate approvals, in (1) ordinary shares of Kitov Parent, at a price per share value (for each Kitov Parent
    share) equal to the higher of (a) NIS 1.824 (subject to adjustments due to stock split and combination) and (b) the average
    price of the shares of Kitov Parent at the closing of trade on the Tel Aviv Stock Exchange during a period of 30 days following
    the lapse of the exercise period, or, at Kitov Parent’ sole discretion, (2) in cash; upon the expiration of the 90 day
    exercise period, the put option, if not exercised by Taoz, shall expire and no longer be valid.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



GHP
and Taoz also reached a settlement agreement in connection with the claims of Taoz towards GHP (and its affiliates). On February
9, 2017, the Court entered a final judgement confirming the settlement arrangements amongst Taoz, TyrNovo and Kitov Parent, as
well as between Taoz and GHP (and its affiliates).



On
February 13, 2017, Kitov Parent appointed Dr. Gil Ben-Menachem, its Vice President of Business Development as a director of TyrNovo.



Kitov
Parent and TyrNovo entered into a Revolving Secured Facility and Pledge Agreement on March 1, 2017, pursuant to which Kitov Parent
has made loans to TyrNovo in an aggregate amount of $750,000. The loans were made on various dates between February 15, 2017 and
March 8, 2017. The principal balance of, and any accrued and unpaid interest on and fees in relation to, the loans were repayable
in full by TyrNovo on March 31, 2017 (the “Maturity Date”). The shareholders of TyrNovo approved an extension of the
Maturity Date to April 30, 2017. Interest accrued on the loans at the rate of Libor + 6% (six percent) per annum, compounded annually,
and paid on the last business day of each calendar year of the term, or on the Maturity Date if occurring prior to the last business
day of a calendar year of the term. As security for the payment in full of its loans and accrued interest and performance of its
other undertakings, TyrNovo granted to Kitov Parent a security interest in all of TyrNovo’s right, title and interest for
the benefit of Kitov Parent, in certain assets and rights of TyrNovo.



On
April 25, 2017, Kitov Parent appointed Mr. Ran Tzror, one of its independent directors, as a director of TyrNovo.





111






An
affiliate of GHP had historically provided certain management, accounting, business development and other ancillary services to
TyrNovo. Upon closing of the sale of GHP’s holdings in TyrNovo to Kitov Parent, TyrNovo terminated this arrangement with
GHP’s affiliate. Kitov Parent now provides applicable services to TyrNovo and expects that a formal arm’s length transaction
services agreement between Kitov Parent and TyrNovo, setting out the terms and conditions of these arrangements, will be finalized
in the near future.



Consulting
Agreement with Lior Tamar Investments Ltd.



In
August 2014, we entered into a consulting agreement with Lior Tamar Investments Ltd., or Lior Tamar, a privately held Israeli
company, pursuant to which Lior Tamar provides us with various services, including  introduction to Israeli investors, facilitating
meetings and introductions to underwriters, assistance in locating business cooperation opportunities, and consultation with respect
to raising debt and bonds.  In consideration for these services, we paid Lior Tamar a monthly fee of $9,500, and 2.5% of
all amounts actually raised and received by us from third parties, excluding amounts received from interested parties. However,
Lior Tamar waived its rights to receive 2.5% of the amounts raised in the November 2015 offering on NASDAQ in exchange for a flat
fee of $245,000 in consideration of Lior Tamar’s services in connection with advising us on matters related to that offering.
Lior Tamar did not serve as a finder, in any way, in connection with that offering. Lior Tamar waived its rights to receive 2.5%
of the amounts to be raised in our follow-on offering on NASDAQ in July 2016 in exchange for a flat fee of $300,000 in consideration
of Lior Tamar’s services in connection with advising us on matters related to that offering. Lior Tamar did not serve as
a finder, in any way, in connection with that offering. The agreement was terminable by either party upon 60 days’ notice,
and Lior Tamar was entitled to payment for any fund raising that closes during the 90 day period following termination of the
agreement.



On
July 27, 2016 we entered into an amendment to the consulting agreement with Lior Tamar, pursuant to which we now pay Lior Tamar
a monthly fee of $12,500 (commencing as of December 2015), and 33.5% of all amounts actually raised and received by us from third
parties in capital markets transactions, excluding amounts received by the Company in certain events, including, amongst others,
amounts received from interested parties, and amounts in excess of $25,000,000 which are received by the Company pursuant to a
funding event as defined in the consulting agreement. In addition we paid Lior Tamar a one-time amendment signing bonus of $50,000.
In the event that, with respect to any contemplated funding event, we shall not be permitted to pay and/or Lior Tamar shall not
be permitted to receive, 3.5% of all amounts actually raised and received by us from third parties in a particular capital markets
transaction, whether for reasons of law, regulation, commercial arrangements of the Company in connection with the transaction,
or otherwise, then Lior Tamar shall provide us with a timely waiver of the such consideration to be received by Lior Tamar in
connection with such transaction. Upon delivery of such waiver Lior Tamar shall be entitled to receive alternative consideration
in connection with such transaction, which accomplishes, to the extent possible, the original business purpose of the waived consideration
in a compliant, valid and enforceable manner. The agreement may be terminated by either party for any reason at any time by furnishing
the other party with a notice of termination 60 days prior to such notice of termination having effect, and Lior Tamar is entitled
to payment for any fund raising that closes during the 90 day period following termination of the agreement; provided, however,
that during the period between July 1, 2016 and December 31, 2018, the advance notice period shall be six months prior to any
notice of termination having effect, and during the period of time when this extended notice period is in effect, Lior Tamar is
entitled to payment for any fund raising that closes during the 30 day period following termination of the agreement.



A
company under the control of Isaac Israel, our chief executive officer and member of our board of directors, provides consulting
services to Capital Point Ltd. by having Mr. Israel acting as a director at certain companies in which Capital Point Ltd. has
made investments. Capital Point Ltd. is a public company traded on the TASE, which is co-managed by certain individuals known
to us to be the principals of Lior Tamar Investments Ltd. In addition, Mr. Arye Weber, one of our independent directors, serves
as an External Director on the board of directors of Capital Point Ltd., as well as on Capital Point Ltd.’s audit and compensation
committees.



The
Company’s audit committee and board of directors approved this consulting agreement with Lior Tamar, as well as the amendment
thereto, in accordance with the requirements of the Companies Law.





112






August
2015 Loan Agreement



On
August 12, 2015 we entered into a loan agreement with certain lenders, pursuant to which the lenders extended us a loan, or the
August Loan, in the aggregate amount of $430,000, or the Principal Amount. Haiku Capital Ltd., who at the time was not a related
party, becoming such only as a result of our initial U.S. offering in November 2015, provided us $100,000 of the August Loan.
In addition, we received an option, or the Additional Financing Option, at any time until the earliest of (i) completion of our
initial public offering in the United States, or a U.S. offering; (ii) the completion of a public offering on the Tel Aviv Stock
Exchange, or TASE, of our securities, or an Israeli Offering; or (iii) December 31, 2015, to require that each lender advance
an additional principal amount equal to the Principal Amount advanced by such lender and up to an additional aggregate of $430,000,
or the Additional Principal Amount, and the Additional Principal Amount together with the Principal Amount, the Loan Amount. Such
Additional Principal Amount, if any, shall have the same terms and conditions as the Principal Amount. Haiku Capital Ltd. committed
to $100,000 of such Additional Principal Amount. The Principal Amount and the Additional Principal Amount did not bear interest
and were not linked to any index. We did not exercise the option for the Additional Principal Amount. Each lender in the August
Loan placed an order to purchase ADSs and warrants in the U.S. offering in an amount equal to or greater than such lender's Loan
Amount. As such, and as we completed a U.S. Offering, we were required to repay the Loan Amount to each lender and also to pay
each lender an allocation fee equal to 33% of the lender’s Principal Amount advanced by such lender. The payments occurred
in December 2015 following the completion of our U.S. offering.



Share
Transfer Agreement with Kitov Pharmaceuticals



On
July 11, 2013, pursuant to a Share Transfer Agreement dated April 2, 2013 between Kitov Parent, Kitov Pharmaceuticals, Dr. Morris
Laster and JPW PCH LLC (Kitov Pharmaceutical’s shareholders at the time), and the controlling shareholder in Kitov Pharmaceuticals
at such time, Mr. Sheer Roichman and Haiku Capital Ltd. (a private company wholly owned by Mr. Roichman), Kitov Parent (then called
Mainrom Line Logistics Ltd.) acquired the shares of Kitov Pharmaceuticals in exchange for the issuance of 1,351,478 ordinary shares
to Kitov Pharmaceutical’s shareholders, representing at the time 63.75% of the fully diluted share capital of Kitov Parent.
In addition, pursuant to the agreement, Kitov Parent issued to the former shareholders of Kitov Pharmaceutical a right to purchase
an additional 1,379,060 ordinary shares of Kitov Parent if within 28 months from the completion of the acquisition, or November
11, 2015, we complete our Phase III clinical trial and the data analyses have demonstrated that the reduction in blood pressure
in the group treated with KIT-302 was at least half of that achieved with amlodipine monotherapy, known as the Milestone. In addition,
under the terms of the Share Transfer Agreement, Mr. Roichman was entitled to receive various sums from the funds raised by us
from public and private financings. This amount was paid in full by us in March 2014.



At
the closing of the Share Transfer Agreement, Kitov Pharmaceutical’s shareholders transferred 100% of Kitov Pharmaceuticals
share capital on a fully diluted basis to us, as follows: (i) 80% of the share capital directly to us and (ii) 20% of the share
capital to a trustee, to hold such shares for our sole benefit until the earlier of the occurrence of: (A) the Milestone referred
to above or (B) 28 months from the closing of the Share Transfer Agreement, or November 11, 2015. On November 11, 2015 the 20%
share capital held by the trustee was transferred to us, resulting in our holding 100% of the share capital of Kitov Pharmaceuticals.
Furthermore, in December 2015, we issued an additional 1,379,060 of our ordinary shares to the former shareholders of Kitov Pharmaceuticals
Ltd. as a result of the attainment of the Milestone, including the issuance of 1,103,248 Ordinary Shares of Kitov Parent to JPW
PCH LLC, a Virginia limited liability company, owned 51% by Dr. John Paul Waymack, the chairman of the board of directors.



Pursuant
to the agreement, Kitov Parent granted to its external consultants, Lior Tamar Investments Ltd., held by Mr. Shay Itzhak Lior
and Mr. Yossi Tamar, options to acquire 1,194,616 ordinary shares of Kitov Parent and agreed to grant to Mr. Simcha Rock, our
current chief financial officer and a director, options to acquire 1,370,056 ordinary shares of Kitov Parent, subject to the adoption
of an option plan (of this amount, 181,089 of the options to be granted to Mr. Rock are subject to Kitov Parent attaining the
milestone referred to above and 1,011,500 options are subject to fund raising by Kitov Parent in the amount of NIS 1,000,000).



At
closing, Mr. Sheer Roichman granted Kitov Parent a loan in the amount of NIS 500,000, free of interest and linkage. Kitov Parent
was to repay the loan to the lender on the date on which it and/or Kitov Pharmaceuticals will raise after the transaction, an
amount of no less than NIS 500,000. In the event that the loan was not paid when due, Mr. Roichman would be entitled to convert
the loan to securities of Kitov Parent at a conversion price reflecting a 30% discount to the average price of Kitov Parent's
shares during 30 trading days preceding the date on which Mr. Roichman notified Kitov Parent of his intention to convert the loan.
This loan was repaid in March 2014.





113






As
part of the agreement, Mr. Roichman agreed that in the event Kitov Parent issues its shares to the public and receives early commitments
to purchase its securities in an amount of no less than NIS 500,000, Mr. Roichman will participate in the offering by placing
an order for Kitov Parent shares in an amount of no less than NIS 750,000. If the offering to the public will include the grant
of options to acquire Kitov Parent shares for a cash payment, Mr. Roichman will place orders for Kitov Parent's securities offered
to the public in an amount of NIS 750,000 minus the exercise price of the offered options which he will acquire (in the event
that all orders placed by Mr. Roichman under the public offering will be fully received). It is noted, that insofar as the amount
of the loan made by Mr. Roichman to Kitov Parent referred to above is not repaid on issuance date, Mr. Roichman will only pay
the exercise price to Kitov Parent in exchange for the purchased options on the option exercise date insofar as he elects to exercise
the options, and the purchase price will be offset against repayment of the loan. This requirement was satisfied at the time of
Kitov Parent's March 2014 offering of ordinary shares on the Tel Aviv Stock Exchange.



In
addition, under the terms of the agreement, Mr. Roichman is entitled to receive out of all the funds that will be raised by Kitov
Parent from public and private financings, including through convertible loans, in one or more transactions and including funds
invested by Mr. Roichman himself the following sums: (a) 10% of the amounts invested up to a total cumulative sum of NIS 9 million
and (b) 25% of the invested amounts exceeding NIS 9 million, up to a cumulative amount of NIS 2.5 million, also called the maximum
remuneration sum, plus VAT if required. This amount was paid by Kitov Parent in March 2014.



As
part of the agreement, the parties agreed that all the loans granted to Kitov Parent and/or to Kitov Pharmaceuticals by Mr. Roichman
and/or by controlling stakeholders of Kitov Pharmaceuticals, as the case may be, up to the closing, except the loan made by Mr.
Roichman to Kitov Parent on the closing date, will be repaid to Mr. Roichman and/or to the controlling stakeholders of Kitov Pharmaceuticals
on a pro rata basis according to their relative share in the debts of Kitov Parent, subject to payment of the maximum remuneration
sum referred to above.



Upon
closing of the transaction, Dr. Paul Waymack, Dr. Morris Laster and Mr. Simcha Rock were appointed to the board of directors of
Kitov Parent, replacing Mr. Erez Goldstmidt, Mr. Hedan Orenstein and Mr. Oren Giditz, who resigned.



Kitov
Parent repaid all obligations to Mr. Sheer Roichman under the agreement and satisfied all of its obligations under the agreement
to pay the maximum remuneration sum by the payment of NIS 2.5 million at such time as Kitov Parent completed its approximately
NIS 17.2 million financing in March 2014 pursuant to a prospectus published and approved by the Israel Securities Authority.



Loans
from Mr. Sheer Roichman



From
November 2013 to February 2014, Kitov Parent received loans in the aggregate amount of NIS 990,000 (approximately $285,000 based
on the representative rate of exchange on December 31, 2013) pursuant to a loan agreement with several lenders, including Mr.
Sheer Roichman and third parties. The loans did not bear interest and were not linked to the CPI. However, we paid to the lenders
a credit allocation commission in the amount of approximately NIS 330,000 (approximately $95,000 based on the representative rate
of exchange on December 31, 2013), payable to the lenders together with the principal of the loan on the loan repayment date.
The entire loan and commission have been repaid according to its terms.



Other
Related Party Agreements



We
have entered into agreements with our executive officers and key employees. See “Item 6. Directors, Senior Management and
Employees – B. Compensation”.



For
information on exemption and indemnification letters granted to our officers and directors, please see “Item 6. Directors,
Senior Management and Employees - C. Board Practices - Exculpation, Insurance and Indemnification of Directors and Officers.”



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



Not
applicable.





114






|ITEM
    8. | FINANCIAL
    INFORMATION
|----------- | -------------------------



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



See
Item 18



Legal
Proceedings



From
time to time, we may become party to legal proceedings and claims in the ordinary course of business, or otherwise.



2015
Motion to Approve a Class Action in Israel



On
December 3, 2015, we announced that we received a lawsuit and motion to approve the lawsuit as a class action lawsuit pursuant
to the Class Action Lawsuits Law 5766-2006 (the “2015 Motion”) which was filed against us and our directors at the
Tel Aviv District Court (Economic Division). The 2015 Motion is with respect to asserted claims for damages to the holders of
our securities listed on the Tel Aviv Stock Exchange, arising due to the public offering of our initial public offering of our
securities in the U.S. during November 2015. In the 2015 Motion it was claimed that the class the petitioners are seeking to represent,
namely, anyone holding our shares at the start of trading on November 22, 2015 exclusive of the respondents and/or anyone acting
on their behalf and/or any affiliates thereof and excluding anyone whose rights to our shares derive from ADS certificates issued
in the U.S to such extent as derived therefrom; and any holders of our Series 2 TASE listed warrants as of the start of trading
on November 22, 2015, exclusive of the respondents and/or anyone acting on their behalf and/or any affiliates thereof (Purported
Class). The total amount claimed from all defendants, if the 2015 Motion is certified as a class action, as set forth in the motion
is approximately NIS 16.4 million. In addition to this amount, the petitioners in the motion are seeking remedies in order to
redress discrimination against the Purported Class owing to the dilution caused by the public offering, including the possibility
that the Purported Class should be awarded from Kitov Parent amounts reflecting the losses of the Purported Class from a possible
price increase in the shares of Kitov Parent following the announcement of the Phase III clinical trial results.



Under
applicable Israeli law, a motion to approve a lawsuit as a class action initially needs to be approved as such by the court. Only
after such approval is granted by the court, will the court proceed to the second stage of hearing the underlying claims of the
class action lawsuit. We announced that we reject the claims asserted in the 2015 Motion. We have delivered our response to the
court in accordance with applicable law, and a preliminary hearing was held by the court on September 12, 2016. At such hearing
the court determined that certain claims of the petitioners in connection with alleged personal interests by affiliates of Kitov
Parent in connection with the public offering of our initial public offering of our securities in the U.S. during November 2015
are not part of the grounds for the 2015 Motion and no remedies shall be sought by the petitioners in connection therewith. The
court set a schedule for the submission by the petitioners of a motion for discovery, and any responses to such motion. An additional
preliminary hearing was held on February 7, 2017. At that hearing the court ruled on the scope of the petitioners’ motion
for discovery, and pursuant to such ruling Kitov Parent delivered to the petitioners (subject to signing confidentiality undertakings)
certain protocols of the board of directors of Kitov Parent. Pursuant to the filing of one of the 2017 Motions to Approve a Class
Action in Israel by the same attorneys for the plaintiffs in the 2015 Motion, Kitov Parent and other respondents in the 2015 Motion
filed a motion to narrow the scope of court's ruling on the petitioners’ motion for discovery, and the petitioners filed
a motion to declare that Kitov Parent did not comply with the court's ruling on the petitioners’ motion for discovery and
therefor is in contempt of the court. Furthermore, petitioners filed a motion for the dismissal of the further motion to narrow
the scope of court's ruling on the petitioners’ motion for discovery. On March 30, 2017 the court ordered the parties to
negotiate on the matter in order to try and reach a procedural agreement, and scheduled an additional preliminary hearing for
May 4, 2017.



115






On
November 8, 2016, a shareholder of Kitov Parent submitted a request to the court in connection with the 2015 Motion to be excluded
from the Purported Class and claiming to have independent causes of action and claims of approximately NIS 1 million (the “Petition
to Exclude”). We responded to the court as required, and, amongst other arguments, we noted that pursuant to the Class Action
Lawsuits Law 5766-2006 and the Regulations enacted thereunder, at the current stage of the court proceedings with respect to the
Motion, such shareholder cannot petition to be excluded from the Purported Class. The court ordered the shareholder to respond
to our response and he has done so. The shareholder has not submitted any independent lawsuit against us, and we are of the view
that such shareholder’s claims are identical to the asserted claims for damages in the Motion.



We
have been advised by our attorneys that the likelihood of Kitov Parent not incurring any financial obligation as a result of the
class action (including the 2015 Motion and the Petition to Exclude) exceeds the likelihood that Kitov Parent will incur a financial
obligation. At this preliminary stage however, we are unable, with any degree of certainty, to make any other evaluations or any
other assessments with respect to the 2015 Motion's probability of success or the scope of potential exposure, if any.



ISA
Investigation





On February
7, 2017, we announced that Kitov Parent is currently being investigated by the Israeli Securities Authority (the “ISA”
and the “Investigation,” or “ISA Investigation” respectively). We have not yet been advised by the ISA
of the full scope and focus of the Investigation. However, as previously disclosed by us on May 1, 2017, we have had discussions
with the ISA regarding the Investigation, and are able to provide additional information to our investors and other stakeholders,
with regard to the nature of the ISA’s concerns with respect to Kitov Parent.



Based on these
discussions with the ISA, we understand that the Investigation with respect to Kitov Parent relates to the Data Monitoring Committee
("DMC") that was appointed in connection with our Phase III clinical trial of KIT-302. In connection with the clinical
trial, we appointed an independent statistician and an orthopedist to serve as our DMC in order to review the preliminary results
of the initial patient group, with respect to determining if it would be necessary to increase the number of patients to be enrolled
in the clinical trial in order to demonstrate statistical validity required to meet the primary endpoint of the clinical trial.









This DMC's
responsibilities and reporting procedures were detailed in a document that was distributed to all the team members involved in
the clinical trial, including the members of the DMC (the "Procedure"). According to this Procedure, a group of external
independent statisticians was to receive the preliminary clinical trial results and analyze the standard deviations. The Procedure
provided that the independent statisticians would send the analyzed standard deviations to both of the DMC members, who would then
review the analysis, and determine whether or not the primary efficacy endpoint was met (i.e. they were to look at the statistician's
printout and see if the lower limit of the 95% confidence interval for the KIT-302 drug exceed 50% of the value for amlodipine). It
is our understanding that the ISA is investigating the circumstances surrounding the actual dissemination of the statistical analysis
to the members of the DMC, and whether or not this led to any misleading disclosures in any of the Company's public filings.





We
believe that the ISA’s concerns with respect to the DMC are misguided and not consistent with industry accepted U.S. Food
and Drug Administration (“FDA”) regulatory requirements, nor with the procedures for the conduct of clinical trials
for the purposes of New Drug Application submissions to the FDA. In addition, we strongly dispute the legal ramifications of any
possible concerns of the ISA with respect to our disclosures in these matters. We firmly believe that (i) the information relating
to the circumstances surrounding the actual dissemination of the statistical analysis to the members of this DMC is not material;
and (ii) that such information was not material at the time of the Company’s announcement of the final clinical trial results.
This matter had no impact whatsoever on the validity of the statistical analysis of the KIT-302 Phase III clinical trial data,
which met its primary efficacy endpoint with statistical significance. Furthermore, we believe that the ISA is not the regulatory
body authorized to evaluate the materiality of events and the completeness of public disclosures made by us in compliance with
United States federal securities laws.



The process actually undertaken by us in connection with such clinical trial results, fully
complied with the requirements of the FDA, and the Medicines and Healthcare products Regulatory Agency (“MHRA”) and
the human ethics committee agreed-to protocol for the Phase III clinical trial of KIT-302 (“Clinical Trial Protocol”).
Some clinical studies, mostly in certain types of Phase III clinical trial studies where it is required under the applicable clinical
trial protocol, are overseen by an independent group of qualified experts organized by the clinical study sponsor, known as a
data safety monitoring board or committee. This group recommends whether or not a trial may move forward at designated check points
based on access to certain data from the study. The clinical study sponsor may also suspend or terminate a clinical trial based
on evolving business objectives and/or competitive climate. According to the KIT-302 Phase III Clinical Trial Protocol approved
by the above-mentioned regulatory authorities, no data monitoring committee or data safety monitoring board or committee was required
at all, and the committee we named “DMC”, had no authority or power to modify or otherwise alter the conduct of the
clinical trial, and was not tasked with usual data safety monitoring board or committee responsibilities related to a clinical
trial.



116






In
accordance with the Clinical Trial Protocol, which had been approved by the FDA, the decision as to whether or not to add additional
patients, or to stop patient enrollment, was based solely upon the statistical analysis of the preliminary data performed by an
independent statistician (who was also a member of our “DMC”). The statistical analysis of the preliminary data collected
in the Phase III clinical trial definitively showed that the study met the pre-specified criteria the FDA required for stopping
patient enrollment and completing the final statistical analyses. The statistical analyses of the efficacy data collected in the
Phase III clinical trial of KIT-302 resulted in a p-value of less than 0.001, clearly demonstrating that the Phase III clinical
trial met its primary efficacy endpoint with statistical significance (any p-value less than 0.05 would have been adequate by
statistical standards for proving efficacy).



The
Investigation is still ongoing, and our officers are fully cooperating with the ISA in its Investigation. Kitov Parent’s
board of directors has expressed its full support of Company management. The Company, its officers and board of directors  look
forward to the conclusion of this Investigation in the most expeditious manner possible.



The information
in connection with the Investigation disclosed above, and elsewhere herein this Annual Report on Form 20-F, may not necessarily
reflect the full scope or focus of the Investigation, or the entirety of any allegations being investigated and/or which may ultimately
be raised by the ISA against the Company and/or any of its officers or affiliates. At this preliminary stage, we are still unable,
with any degree of certainty, to make any other evaluations or any other assessments with respect to the ISA Investigation or the
scope of potential exposure, if any.





2017
Motions to Approve a Class Action in Israel



On February 16, 2017, we announced that four lawsuits and motions to approve the lawsuits
as a class action lawsuit were filed against us and certain of our office holders at the Tel Aviv District Court (Economic Division),
and served on us, with each such motion relating to the ISA Investigation into our public disclosures around certain aspects of
the studies related to our lead drug candidate, KIT-302 (the “2017 Motions”).



The
first motion was filed against us, our executive directors and certain of our former directors, by the law offices of Tadmor &
Co. and Prof. Yuval Levy & Co. acting on behalf of one of our shareholders, Mr. Kobi Koren, who is requesting to act as representative
of all shareholders of record from December 10, 2015 until February 6, 2017. The plaintiff alleges, among other things, that we
included misleading information in our public filings, which caused the class for which the plaintiff is seeking recognition an
aggregate loss of NIS 25,545,206 (approximately US$ 6,818,000).



The
second motion was filed against us, our executive directors and certain of our present and former directors, by the law offices
of Yanay & Co. acting on behalf of Mr. Ilan Vainreb, Ms. Merav Shir, Mr. Dimitry Braverman and Mr. Tzhaci Tal Gaon, our shareholders,
who are requesting to act as representatives of all our shareholders on February 6, 2017, the date the ISA's investigation was
reported, excluding the respondents named in the motion. The plaintiffs allege, among other things, that we included misleading
information in our public filings which caused the class for which the plaintiffs are seeking recognition an aggregate loss of
NIS 36,525,592.51 (approximately US$ 9,748,000).



The
third motion was filed against us, our executive directors and certain of our former directors, and our former internal auditor,
by the law offices of Redei-Gadot acting on behalf of Messrs. Reuven Hay Refua and Binyamin Gabay, our shareholder, who are requesting
to act as representatives of all shareholders of record from December 15, 2015 until February 6, 2017, excluding the respondents
in the motion. The plaintiffs allege, among other things, that we included misleading information in our public filings which
caused the class for which the plaintiffs are seeking recognition, an aggregate loss of NIS 33,235,000 (approximately US$8,870,000).
This motion has since been withdrawn in response to the Petition for Dismissal (see below).



117






The
fourth motion was filed against us, our executive directors and certain of our present and former directors, by the law offices
of Kalai, Rosen & Co. acting on behalf of by Messrs. Yoram Chayut and Gur Tzemach, our shareholders, who are requesting to
act as representatives of all shareholders of record from December 10, 2015 until February 6, 2017. The plaintiffs allege, among
other things, that we included misleading information in our public filings which caused the class for which the plaintiffs are
seeking recognition, an aggregate loss of NIS 29,094,290 (approximately US$ 7,765,000).The
petitioners this motion have petitioned the court to dismiss the other 3 of the 2017 Motions (“Petition for Dismissal”).
The court granted the petitioners in the other 3 of the 2017 Motions, as well as the Company and the other defendants, until March
28, 2017 to respond to Petition for Dismissal. The Company and the other defendants filed its response to the Petition for Dismissal
on March 28, 2017. In addition on March 28, 2017, the Company and the defendants in all of the 2017 Motions submitted a request
to the court to extend the deadline for responding to any of the 2017 Motions until 90 days subsequent to the decision by the
court in the Petition for Dismissal. In a court decision from March 30, 2017, the court advised the plaintiff parties to try and
reach a procedural agreement regarding the combination of the motions, and all relevant deadlines for responding were extended
until a subsequent decision to be made. In a court decision from April 3, 2017, after all responses to the Petition for Dismissal
were filed, the court again decided that the plaintiffs should try to reach a procedural agreement regarding the combination of
the motions and update the court in the matter until May 3, 2017. This latter decision also stated that the respondents (including
the Company) may be party to any such procedural agreement.



Under
applicable Israeli law, a motion to approve a lawsuit as a class action initially needs to be approved as such by the court. Only
after such approval is granted by the court, will the court proceed to the second stage of hearing the underlying claims of the
class action lawsuit. The court may also determine to combine the 2017 Motions, based on, among other things, considering the
underlying facts and circumstances of each motion.



Our
management rejects the claims in all of the aforesaid 2017 Motions. At this preliminary stage we are unable, with any degree of
certainty, to make any evaluations or any assessments with respect to the 2017 Motions as to the probability of success or the
scope of potential exposure, if any.



U.S.
Class Actions



On
February 7, 2017, an individual who allegedly acquired Kitov Parent’s securities, individually and on behalf of a putative
class of investors who purchased or otherwise acquired Kitov Parent’s securities, filed a lawsuit in the United States District
Court for the Southern District of New York against Kitov Parent, its CEO and CFO, alleging violations of U.S. federal securities
laws and seeking unspecified damages and other relief based on, among other things, Kitov Parent allegedly including misleading
information in its public filings. Our time to respond to the Complaint is to be determined. An initial pretrial conference is
scheduled for May 18, 2017.



On February 10, 2017, an
individual who allegedly acquired Kitov Parent’s securities, individually and on behalf of a putative class of investors
who purchased or otherwise acquired Kitov Parent’s securities, filed a lawsuit in the Superior Court of the State of California
for the County of San Mateo against Kitov Parent, its CEO and CFO, and the underwriters of Kitov Parent’s initial public
offering, alleging violations of U.S. federal securities laws and seeking unspecified damages and other relief based on, among
other things, Kitov Parent allegedly including misleading information in its public filings.





On
March 20, 2017, an individual who allegedly acquired Kitov Parent’s securities, individually and on behalf of a putative
class of investors who purchased or otherwise acquired Kitov Parent’s securities, filed a lawsuit in the Superior Court
of the State of California for the County of San Mateo against Kitov Parent, its CEO and CFO, and the underwriters of Kitov Parent’s
initial public offering, alleging violations of U.S. federal securities laws and seeking unspecified damages and other relief
based on, among other things, Kitov Parent allegedly including misleading information in its public filings.



On
April 6, 2017, the Superior Court of the State of California for the County of San Mateo entered an order consolidating the two
California putative class actions. On April 13, 2017, the court entered a case management order requiring the plaintiffs to file
and serve an amended consolidated complaint on or before June 5, 2017. The case management order requires Kitov Parent and the
other defendants to file and serve their answers or other responses to the amended consolidated complaint on or before July 20,
2017. The court has scheduled an initial case management conference for October 11, 2017.





118






Our
management rejects the claims in all of the aforesaid class actions lawsuits in the United States of America (the “U.S.
Class Actions”). At this preliminary stage we are unable, with any degree of certainty, to make any evaluations or any assessments
with respect to the U.S. Class Actions as to the probability of success or the scope of potential exposure, if any.



Other
than the 2015 Motion, the ISA Investigation, the 2017 Motions and the U.S. Class Actions, we are not currently a party to any
significant legal or arbitration proceedings involving any third party, including governmental proceedings pending or known to
be contemplated, which may have, or have had in the recent past, significant effects on the company’s financial position
or profitability.



Dividend
Policy



We
anticipate that, for the foreseeable future, we will retain any future earnings to support operations and to finance the growth
and development of our business. Therefore, we do not expect to pay cash dividends for at least the next several years. We did
not declare dividends during the three most recent fiscal years.



The
distribution of dividends may also be limited by the Companies Law, which permits the distribution of dividends only out of retained
earnings or earnings derived over the two most recent fiscal years, whichever is higher, provided that there is no reasonable
concern that payment of a dividend will prevent a company from satisfying its existing and foreseeable obligations as they become
due. Our amended and restated articles of association provide that dividends will
be paid at the discretion of, and upon resolution by, our board of directors, subject to the provision of the Companies Law.



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



Except
as otherwise disclosed in this Annual Report on Form 20-F, no significant change has occurred since December 31, 2016.



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



|A. | Offer
    and Listing Details
|-- | -----------------------------



Our
ordinary shares are currently traded on the TASE under the symbol “KTOV”. Our ADSs and public warrants are currently
traded on NASDAQ under the symbols “KTOV” and “KTOVW”, respectively.



The
following table sets forth, for the periods indicated, the reported high and low closing sales prices of our ADSs on NASDAQ.



|                                             |  | $ U.S.        |     
|-------------------------------------------- |  | ------------- | ----
|                                             |  | Price Per ADS |     
|                                             |  | High          |     
|Most Recent Six Months                       |  |               |     
|April 2017                                   |  |               | 2.04
|March 2017                                   |  |               | 2.16
|February 2017                                |  |               | 2.88
|January 2017                                 |  |               | 3.35
|December 2016                                |  |               | 3.51
|November 2016                                |  |               | 3.75
|                                             |  |               |     
|Quarterly                                    |  |               |     
|First Quarter 2017                           |  |               | 3.35
|Fourth Quarter 2016                          |  |               | 4.32
|Third Quarter 2016                           |  |               | 3.62
|Second Quarter 2016                          |  |               | 6.68
|First Quarter 2016                           |  |               | 4.60
|Fourth Quarter 2015 (commencing November 20) |  |               | 4.47
|                                             |  |               |     
|Annual                                       |  |               |     
|2017 (through April 30)                      |  |               | 3.35
|2016                                         |  |               | 6.68
|2015 (commencing November 20)                |  |               | 4.47





119






The
following table sets forth, for the periods indicated, the reported high and low closing sales prices of the public warrants traded
on NASDAQ.



|                                             |  | $ U.S.                   |     
|-------------------------------------------- |  | ------------------------ | ----
|                                             |  | Price Per Public Warrant |     
|                                             |  | High                     |     
|Most Recent Six Months                       |  |                          |     
|April 2017                                   |  |                          | 0.55
|March 2017                                   |  |                          | 0.58
|February 2017                                |  |                          | 0.99
|January 2017                                 |  |                          | 1.36
|December 2016                                |  |                          | 1.47
|November 2016                                |  |                          | 1.68
|                                             |  |                          |     
|Quarterly                                    |  |                          |     
|First Quarter 2017                           |  |                          | 1.36
|Fourth Quarter 2016                          |  |                          | 2.38
|Third Quarter 2016                           |  |                          | 1.10
|Second Quarter 2016                          |  |                          | 2.50
|First Quarter 2016                           |  |                          | 1.10
|Fourth Quarter 2015 (commencing November 20) |  |                          | 0.75
|                                             |  |                          |     
|Annual                                       |  |                          |     
|2017 (through April 30)                      |  |                          | 1.36
|2016                                         |  |                          | 2.5 
|2015 (commencing November 20)                |  |                          | 0.70





120






The
following table sets forth, for the periods indicated, the reported high and low closing sales prices of our ordinary shares on
the TASE in NIS and U.S. dollars. U.S. dollar per ordinary share amounts are calculated using the U.S. dollar representative rate
of exchange on the date to which the high or low market price is applicable, as reported by the Bank of Israel.





|                       |  | NIS                        |       |  | $ U.S.                     | 
|---------------------- |  | -------------------------- | ----- |  | -------------------------- | 
|                       |  | * Price Per Ordinary Share |       |  | * Price Per Ordinary Share | 
|                       |  | High                       |       |  | Low                        | 
|Most Recent Six Months |  |                            |       |  |                            | 
|April 2017             |  |                            | 0.38  |  |                            | 
|March 2017             |  |                            | 0.41  |  |                            | 
|February 2017          |  |                            | 0.55  |  |                            | 
|January 2017           |  |                            | 0.64  |  |                            | 
|December 2016          |  |                            | 0.68  |  |                            | 
|November 2016          |  |                            | 0.69  |  |                            | 
|October 2016           |  |                            | 0.74  |  |                            | 
|                       |  |                            |       |  |                            | 
|Quarterly              |  |                            |       |  |                            | 
|First Quarter 2017     |  |                            | 0.64  |  |                            | 
|Fourth Quarter 2016    |  |                            | 0.74  |  |                            | 
|Third Quarter 2016     |  |                            | 0.66  |  |                            | 
|Second Quarter 2016    |  |                            | 1.29  |  |                            | 
|First Quarter 2016     |  |                            | 0.92  |  |                            | 
|Fourth Quarter 2015    |  |                            | 2.07  |  |                            | 
|Third Quarter 2015     |  |                            | 1.82  |  |                            | 
|Second Quarter 2015    |  |                            | 1.84  |  |                            | 
|First Quarter 2015     |  |                            | 4.13  |  |                            | 
|                       |  |                            |       |  |                            | 
|Annual                 |  |                            |       |  |                            | 
|2016                   |  |                            | 1.29  |  |                            | 
|2015                   |  |                            | 4.13  |  |                            | 
|2014                   |  |                            | 18.06 |  |                            | 
|2013                   |  |                            | 33.27 |  |                            | 
|2012                   |  |                            | 9.31  |  |                            | 



|* | Price adjusted due to the distribution of dividends
in October 2012 in connection with the sale by Kitov Parent (then known as Mainrom Line Logistics Ltd.) of all of its activities,
assets, rights, obligations and liabilities to a private company held by its then controlling shareholders.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
April 28, 2017 the last reported sale price of our ADSs on NASDAQ was $1.88 per ADS, the last reported sale price of the public
warrants on NASDAQ was $0.45 per public warrant. On April 30, 2017 the last reported sale price of our ordinary shares on the
TASE was NIS 0.354 per share, or $0.10 per share (based on the representative U.S. dollar – NIS rate of exchange
of 3.619 on April 30, 2017).



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



Not
applicable.



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



Our
ordinary shares are listed and traded on the TASE under the symbol KTOV. Our ADSs and our public warrants are currently traded
on NASDAQ under the symbols “KTOV” and “KTOVW”, respectively.



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



Not
applicable.



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



Not
applicable.



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



Not
applicable.





121






|ITEM
    10. | ADDITIONAL
    INFORMATION
|------------ | --------------------------



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



Not
applicable.



|B. | Memorandum
    and Articles of Association
|-- | ------------------------------------------



Securities
Registers



Our
registration company for our shares is Registration Company of United Mizrahi Bank Ltd, and its address is 7 Jabotinsky St., Ramat
Gan, Israel.



Our
transfer agent and registrar for our ADSs is the depositary for our ADRs, Bank of New York Mellon, and its address is 101 Barclay
Street, New York, NY.



Objects
and Purposes



According
to our memorandum of association and our amended and restated articles of association,
we are permitted to engage in any legal business. Our registration number with the Israeli Registrar of Companies is Public Company
number 520031238.



Ordinary
Shares



The
following is a description of our ordinary shares. Our authorized share capital is 5,000,000,000 ordinary shares, with no par
value, and 1,000,000,000 non-voting senior preferred shares, with no par value, divided into 5 classes of 200,000,000 preferred
shares in each class. The above amounts include 21 dormant ordinary shares held in treasury.



The
ordinary shares do not have preemptive rights, preferred rights or any other right to purchase our securities. Neither our amended
and restated articles of association nor the laws of the State of Israel restrict the ownership or voting of ordinary shares by
non-residents of Israel, except under certain circumstances for ownership by nationals of certain countries that are, or have
been, in a state of war with Israel.



Transfer
of Shares. Our fully paid ordinary shares may generally be freely transferred under our amended and restated articles of association,
unless the transfer is restricted or prohibited by applicable law or the rules of the stock exchange on which the shares are traded.



Notices.
Under the Companies Law, and regulations promulgated thereunder, and our amended and restated articles of association, we are
required to publish notices on our website, at least 21 days’ prior notice of a shareholders’ meeting. However, under
regulations promulgated under the Companies Law, we are required to publish notices on our website at least 35 calendar days prior
any shareholders’ meeting in which the agenda includes matters which may be voted on by voting instruments. Regulations
under the Companies Law exempt companies whose shares are listed for trading both on a stock exchange in and outside of Israel,
from some provisions of the Companies Law. These regulations exempt us from some of the requirements of the Israeli proxy regulations,
under certain circumstances.



According
to the Companies Law and the regulations promulgated thereunder, as applicable to Kitov Parent, for purposes of determining the
shareholders entitled to notice and to vote at such meeting, the board of directors may fix the record date not more than 40 nor
less than four calendar days prior to the date of the meeting, provided that an announcement regarding the general meeting shall
be given prior to the record date.





122






Election
of Directors. Under our amended and restated articles of association, the number of directors on our Board will be no less
than four and no more than nine (including any external directors, to the extent that we may be required to appoint external directors
in accordance with the Companies Law and any Regulations enacted thereunder) (“Maximum Number”). The majority of the
members of the Board shall be residents of Israel, unless our center of management shall have been transferred to another country
in accordance with a resolution of our Board by a majority of three quarters (75%) of the participating director votes. The number
of directors may be changed, at any time and from time to time, by our shareholders with a majority of (a) 75% of the voting rights
participating and voting on the matter in the applicable general meeting of our shareholders and (b) more than 47.9% of all of
the voting rights in Kitov Parent as of the record date established for the applicable general meeting of our shareholders (“Special
Majority”). For more information, please see “Item 6 – Directors, Senior Management and Employees – C.
Board Practices.”



Dividend
and Liquidation Rights. Subject to preferences that may be applicable to any then outstanding preferred shares, our profits,
in respect of which a resolution was passed to distribute them as dividend or bonus shares, shall be paid pro rata to the amount
of shares held by the shareholders. In the event of our liquidation, the liquidator may, with the general meeting’s approval,
and subject to any preferences that may be applicable to any then outstanding preferred shares, distribute parts of our property
in specie among the shareholders and he or she may, with similar approval, deposit any part of our property with trustees in favor
of the shareholders as the liquidator, with the approval mentioned above, deems fit.



Voting,
Shareholders’ Meetings and Resolutions. Holders of ordinary shares are entitled to one vote for each ordinary share
held on all matters submitted to a vote of shareholders. The quorum required for an ordinary meeting of shareholders consists
of at least two shareholders present, in person or by proxy, or who has sent us a voting instrument indicating the way in which
he or she is voting, who hold or represent, in the aggregate, at least 25% of the voting rights of our outstanding share capital.
A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or any
time and place as prescribed by the board of directors in notice to the shareholders. At the reconvened meeting one shareholder
at least, present in person or by proxy constitutes a quorum except where such meeting was called at the demand of shareholders.
With the agreement of a meeting at which a quorum is present, the chairman may, and on the demand of the meeting he must, adjourn
the meeting from time to time and from place to place, as the meeting resolves. Annual general meetings of our shareholders are
to be held once every year within a period of not more than 15 months after the last preceding annual general shareholders’
meeting. Our board of directors may call special general meetings of shareholders. The Companies Law provides that a special general
meeting of shareholders may be called by the board of directors or by a request of two directors or 25% of the directors in office,
whichever is the lower, or by shareholders holding at least 5% of our issued share capital and at least 1% of the voting rights,
or of shareholders holding at least 5% of our voting rights, subject to the provisions set forth in our amended and restated articles
of association.



An
ordinary resolution requires approval by the holders of a majority of the voting rights present, in person or by proxy, at the
meeting and voting on the resolution.



Allotment
of Shares. Our board of directors has the power to allot or to issue shares to any person, with restrictions and condition
as it deems fit.



Preferred
Shares



Pursuant
to Israel’s securities laws, a company whose ordinary shares are registered for trade on the TASE may not have more than
one class of shares for a period of one year following initial registration of the company on the TASE. After a period of one
year, it is permitted to issue preferred shares if the preference of those shares is limited to a preference in the distribution
of dividends and these preferred shares have no voting rights, and if such issuance is otherwise in accordance with any then applicable
TASE regulations or directives with respect to the issuance of preferred shares by a company whose ordinary shares are listed
on the TASE.



We
presently do not have any issued and outstanding preferred shares. On December 5, 2016, our shareholders approved the amendment
to our amended and restated articles of association, as well as to our memorandum of association, for the addition to Kitov Parent’s
registered share capital of 1,000,000,000 non-voting senior preferred shares, with no par value, divided into 5 classes of 200,000,000
preferred shares in each class (the “Preferred Shares”).





123






Pursuant
to our amended and restated articles of association, our board of directors is authorized to fix, by resolution of the board of
directors, (i) the number of issued Preferred Shares (subject to the maximum number of Preferred Shares authorized in such class),
(ii) the designation of such class of Preferred Shares, and (iii) the conversion, redemption, optional and other special rights,
qualifications, limitations or restrictions, if any, of the shares of such class of Preferred Shares. Consequently, the issuance
of Preferred Shares would be available for issuance without further actions by Kitov Parent’s shareholders, unless shareholder
approval is required by Israeli law, the rules of any exchange or other market on which Kitov Parent’s securities may then
be listed or traded, Kitov Parent’s articles of association then in effect, or any other applicable rules and regulations.
For so long as we are also listed on the TASE, the issuance of any Preferred Shares will also be subject to the requirements of
any TASE regulations or directives governing the issuance of preferred shares by companies whose ordinary shares are listed on
the TASE. The TASE has not yet issued any directives in connection with the issuance of preferred shares by a company whose ordinary
shares are listed on TASE, other than a recently issued temporary directive which is currently scheduled to expire in November
2017.



Subject
to the actual terms of issuance determined by our Board of Directors for any Preferred Shares when issued, our Preferred Shares
may be convertible into our ordinary shares or another series of Preferred Shares. Each such series of Preferred Shares shall
have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges
as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation
preferences, conversion rights and preemptive rights, rights, qualifications, limitations and/or restrictions determined by our
board of directors in accordance with our articles of association in effect at the time of any such issuance, including, but not
limited to, some or all of the following: (i) the number of Preferred Shares constituting that series and the distinctive designation
of that series, which number may be increased or decreased (but not below the number of Preferred Shares then outstanding) from
time to time by action of the board of directors; (ii) the dividend rate and the manner and frequency of payment of dividends
on the Preferred Shares of that series, whether dividends will be cumulative, and, if so, from which date; (iii) subject to applicable
law, whether that series will have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such
voting rights; (iv) the terms and conditions of any conversion privilege of the series, including provision for adjustment of
the conversion rate in such events as the board of directors may determine; (iv) whether or not the shares of that series will
be redeemable, and, if so, the terms and conditions of such redemption; (vi) whether that series will have a sinking fund for
the redemption or purchase of Preferred Shares of that series, and, if so, the terms and amount of such sinking fund; (vii) whether
or not the Preferred Shares of the series will have priority over or be on a parity with or be junior to the Preferred Shares
of any other series or class in any respect; (viii) the rights of the Preferred Shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights or priority, if any, of payment
of Preferred Shares of that series; and any other relative rights, preferences and limitations of that series.



Issuance
of Preferred Shares by our board of directors may result in such shares having dividend or liquidation preferences senior to the
rights of the holders of our ordinary shares and, Preferred Shares which are convertible into our ordinary shares could potentially
dilute the voting rights of the holders of our ordinary shares.



Once
designated by our board of directors, and offered hereby, each series of Preferred Shares may have specific financial and other
terms that will be described in a prospectus supplement. The description of the Preferred Shares that is set forth in any prospectus
supplement is not complete without reference to the documents that govern the Preferred Shares.



All
Preferred Shares offered hereby will, when issued, be fully paid and nonassessable, including Preferred Shares issued upon the
exercise of Preferred Share warrants or subscription rights, if any.



Each
Preferred Share shall be entitled to receive upon distribution, and in preference to our ordinary shares, (i) dividends in excess
of the general dividends issued to all shareholders including holders of Ordinary Shares, and/or (ii) amounts paid in a distribution
of our surplus assets on winding up, in an amount equal to the original issue price for such Preferred Shares as set forth in
Kitov Parent’s share registry (adjusted for share combinations or subdivisions or other recapitalizations of Kitov Parent’s
shares), and less the amount of any dividend previously paid in preference, all pro rata to the number of Kitov Parent’s
Preferred Shares of each specific class of Preferred Shares issued and outstanding at such time, without having regard to any
premium paid or discount thereon, and all subject to the provisions hereof.





124






Furthermore,
and after payment of the Preferred Shares’ dividend preferences or liquidation preferences as aforesaid, each Preferred
Share in Kitov Parent’s capital shall be entitled to receive upon distribution, (i) a general dividend issued to all Shareholders,
(ii) bonus shares, and (iii) amounts paid in a distribution of Kitov Parent’s surplus assets on winding up, all pro rata
to the number of Kitov Parent’s Shares (Ordinary Shares and Preferred Shares) issued and outstanding at such time, without
having regard to any premium paid thereon or discount, and all subject to the provisions hereof.



All
Preferred Shares shall be non-voting shares and shall not vest the holder thereof with any right to participate in Kitov Parent’s
general meetings, to receive notice thereof and/or to vote thereat. Without limitation to the above, the Preferred Shares shall
not confer upon the holders thereof any voting rights or any right to appoint directors or any other right with respect to general
meetings, including without limitation, attending, voting at or requesting to convene, such general meetings or proposing matters
for the agenda of such general meetings, except as expressly set forth below or as otherwise specifically provided by Israeli
law.



So
long as any Preferred Shares are outstanding, the provisions of the section below titled “Modification of class rights”,
and the provisions of this section shall apply, such that the adoption of a resolution, by a regular majority in voting power
of the Preferred Shares who are present, entitled to vote thereon (if any) and voting thereon, voting together as a single class,
given in person or by proxy or by an authorized proxy holder, at a meeting of holders of Preferred Shares shall be necessary for
effecting or validating:



| | (i) | Authorization
    of Senior Shares. Any amendment or alteration of the Memorandum of Association or Articles of Association of Kitov Parent
    so as to authorize or create, or increase the authorized amount of, any class or series of shares to be so authorized, created
    or increased after the initial issuance of any class of Preferred Shares, the terms of which expressly provide that such class
    or series will rank senior to the outstanding class or classes of Preferred Shares as to dividend rights and distribution
    rights upon the liquidation, winding up or dissolution of Kitov Parent (collectively, “Senior Shares”);
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Amendment
    of the Preferred Shares. Any amendment, alteration or repeal of any provision of the Articles of Association so as to adversely
    affect the special rights, preferences, privileges or voting powers of the Preferred Shares; and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Share
    Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification
    involving the Preferred Shares, or of a merger or consolidation of Kitov Parent with or into another entity, unless in each
    case (x) the Preferred Shares remain outstanding or, in the case of any such merger or consolidation with respect to which
    Kitov Parent is not the surviving or resulting entity (or the Preferred Shares are otherwise exchanged or reclassified), are
    converted or reclassified into or exchanged for preferred shares of the surviving or resulting entity or its ultimate parent,
    and (y) such Preferred Shares that remain outstanding or such preferred shares, as the case may be, have rights, preferences,
    privileges and voting powers of the surviving or resulting entity or its ultimate parent that, taken as a whole, are not materially
    less favorable to the holders thereof than the rights, preferences, privileges and voting powers, taken as a whole, of the
    Preferred Shares immediately prior to the consummation of such transaction;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





125






provided,
however, that (A) for all purposes of this section, (1) any increase in the amount of Kitov Parent’s authorized Ordinary
Shares or Preferred Shares or the issuance of any additional Ordinary Shares or Preferred Shares or (2) the authorization or creation
of any class or series of shares established after the initial issuance of any class of Preferred Shares, the terms of which do
not expressly provide that such class or series ranks senior to or on a parity with the previously issued and outstanding Preferred
Shares as to dividend rights and distribution rights upon any liquidation, winding up or dissolution of Kitov Parent (collectively,
“Junior Shares”); or the authorization or creation of any class or series of shares established after the initial
issuance of any class of Preferred Shares the terms of which expressly provide that such class or series will rank on a parity
with the previously issued and outstanding Preferred Shares as to dividend rights and distribution rights upon any liquidation,
winding up or dissolution of Kitov Parent (collectively, “Parity Shares”); and, any increase in the amount of authorized
but unissued shares of such class or series of Parity Shares or Junior Shares or the issuance of additional shares of such class
or series of Parity Shares or Junior Shares, will be deemed not to adversely affect (or to otherwise cause to be materially less
favorable) the rights, preferences, privileges or voting powers of the previously issued and outstanding Preferred Shares and
shall not require the consent or the adoption of a resolution by the holders of the previously issued and outstanding Preferred
Shares; (B) in the event of a binding share exchange or reclassification involving the Preferred Shares, or of a merger or consolidation
of Kitov Parent with or into another entity, as described above in which the provisions of sub-section (b)(iii)(x) and (y) above
are complied with, the consent or the adoption of a resolution by the holders of the previously issued Preferred Shares shall
not be required in order to effect, validate or approve such share exchange, reclassification, merger or consolidation; and (C)
to the extent that, notwithstanding the provisions of immediately preceding clauses (A) and (B), the consent or approval of the
holders of Preferred Shares, voting together as a single class, is nonetheless required by applicable law or the Articles of Association
in such circumstances, or such consent or approval is otherwise required by applicable law or the Articles of Association with
respect to any matter that is not set forth in the provisions of items (i)-(iii) of this section above, such approval or consent
may be given by the adoption of a resolution, by a simple majority of the voting power of the Preferred Shares who are present,
entitled to vote thereon (if any) and voting thereon, voting together as a single class, given in person or by proxy or by an
authorized person, at a meeting of holders of Preferred Shares and the legal quorum for any such meeting shall be as set forth
above with respect to meeting of holders of our Ordinary Shares.



The
rules and procedures for calling and conducting any meeting of the holders of Preferred Shares (including, without limitation,
the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of
written consents and any other procedural aspect or matter with regard to such a meeting or such consents shall be governed by
any rules the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to
the requirements of our amended and restated articles of association (including the provisions set forth above), applicable law
and, if applicable, the rules of any national securities exchange or other trading facility on which the Preferred Shares are
listed or traded at the time.



Although
our board of directors has no intention at the present time of doing so, it could authorize the issuance of a series of Preferred
Shares that could, depending on the terms of such series, impede the completion of a merger, tender offer, change of control or
other takeover attempt.



Board
of Directors



Under
our amended and restated articles of association, resolutions by the board of directors shall be decided by a majority of votes
of the directors present, or participating, in the case of voting by media, and voting, each director having one vote. In the
event of a tie, the chairman of the board does not hold a casting vote.



Under
the Companies Law, except as provided below, companies incorporated under the laws of the State of Israel that are “public
companies,” including Israeli companies with shares listed on NASDAQ, are required to appoint at least two external directors
who meet the qualification requirements set forth in the Companies Law. On July 13, 2016, our Board of Directors resolved to adopt
the corporate governance exception set forth in Regulation 5D of the Israeli Companies Regulations (Relief for Public Companies
with Shares Listed for Trading on a Stock Market Outside of Israel), 5760-2000. In accordance with such Regulation, a public company
with securities listed on certain foreign exchanges, including NASDAQ, that satisfies the applicable foreign country laws and
regulations that apply to companies organized in that country relating to the appointment of independent directors and composition
of audit and compensation committees and have no controlling shareholder are exempt from the requirement to appoint external directors
or comply with the audit committee and compensation committee composition requirements under the Companies Law. In accordance
with our Board’s resolution, for so long as Kitov Parent does not have a controlling shareholder as defined in Section 1
of the Companies Law, Kitov Parent intends to comply with the NASDAQ Listing Rules in connection with a majority of independent
directors on the Board and in connection with the composition of each of the Audit Committee and the Compensation Committee, in
lieu of such requirements set forth under the Companies Law. A majority of our Board members are independent as required by the
NASDAQ Listing Rules. Furthermore, our Audit Committee consists of at least three independent directors, and our Compensation
Committee consists of at least two independent directors. Should any person or entity become deemed to be a controlling shareholder
as defined in Section 1 of the Companies Law, then in accordance with Section 248(a) of the Companies Law, we will be required
to convene a special general meeting of the shareholders at the earliest possible date, the agenda of which shall include the
appointment of at least two external directors. Following such appointment, all of the external directors shall be appointed to
each of our Audit Committee and Compensation Committee, and at least one external director shall be appointed to each committee
of the Board of Directors authorized to exercise any of the powers of the board of directors.





126






The
Companies Law requires that certain transactions, actions and arrangements be approved as provided for in a company’s articles
of association and in certain circumstances by the audit committee or the compensation committee and by the board of directors
itself. Those transactions that require such approval pursuant to a company’s articles of association must be approved by
its board of directors. In certain circumstances, audit committee and shareholder approval is also required. The vote required
by the audit committee and the board of directors for approval of such matters, in each case, is a majority of the directors participating
in a duly convened meeting. Under the Companies Law, except as to certain companies listed on foreign stock exchanges, including
NASDAQ, as described above, the audit committee is to be comprised of at least three members appointed by the board of directors,
which members must include all of the external directors. The majority of members of the audit committee must be independent directors
(as defined in the Companies Law), and the chairman of the audit committee must be an external director.



The
Companies Law requires that a member of the board of directors or senior management of the company promptly and, in any event,
not later than the first board meeting at which the transaction is discussed, disclose any personal interest that he or she may
have, either directly or by way of any corporation in which he or she is, directly or indirectly, 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, as well
as all related material information known to him or her, in connection with any existing or proposed transaction by the company.
In addition, if the transaction is an extraordinary transaction, (that is, a transaction other than in the ordinary course of
business, otherwise than on market terms, or is likely to have a material impact on the company’s profitability, assets
or liabilities), the member of the board of directors or senior management must also disclose any personal interest held by his
or her spouse, siblings, parents, grandparents, descendants, spouse’s descendants, siblings and parents, and the spouses
of any of the foregoing.



Once
the member of the board of directors or senior management complies with the above disclosure requirement, a company may approve
the transaction in accordance with the provisions of its articles of association. Under the provisions of the Companies Law, whoever
has a personal interest in a matter, which is considered at a meeting of the board of directors or the audit committee, may not
be present at this meeting or vote on this matter, unless it is not an extraordinary transaction as defined in the Companies Law.
However, if the chairman of the board of directors or the chairman of the audit committee has determined that the presence of
an office holder with a personal interest is required for the presentation of a matter, such officer holder may be present at
the meeting. Notwithstanding the foregoing, if the majority of the directors have a personal interest in a matter, they shall
be allowed to participate and vote on this matter, but the approval of the transaction by the shareholders in the general meeting
is required.



Our
amended and restated articles of association provide that, subject to the Companies Law, all actions executed in good faith by
the board of directors or by a committee thereof or by any person acting as a director or a member of a committee of the board
of directors, will be deemed to be valid even if, after their execution, it is discovered that there was a flaw in the appointment
of these persons or that any one of these persons was disqualified from serving at his or her office.



Our
amended and restated articles of association provide that, subject to the provisions of the Companies Law, the board of directors
may appoint board of directors’ committees. The committees of the board of directors shall report to the board of directors
their resolutions or recommendations on a regular basis, as shall be prescribed by the board of directors. The board of directors
may cancel the resolution of a committee that has been appointed by it; however, such cancellation shall not affect the validity
of any resolution of a committee, pursuant to which we acted, vis-à-vis another person, who was not aware of the cancellation
thereof. Decisions or recommendations of the committee of the board which require the approval of the board of directors will
be brought to the directors’ attention a reasonable time prior to the discussion at the board of directors.





127






According
to the Companies Law, a contract of a company with its directors, regarding their conditions of service, including the grant to
them of exemption from liability from certain actions, insurance, and indemnification as well as the company’s contract
with its directors on conditions of their employment, in other capacities, generally requires the approval of the compensation
committee (or the audit committee acting in lieu of a compensation committee pursuant to the Companies Law), the board of directors,
and the shareholders.



Under
the Companies Regulations (Relief from Related Party Transactions), 5760-2000, promulgated under the Companies Law, as amended,
certain extraordinary transactions between a public company and its controlling shareholder(s) do not require shareholder approval.
Such extraordinary transactions must be approved by both the board of directors and the audit committee and (i) must involve the
extension of an existing transaction that was duly approved and does not involve any significant change in the terms of the existing
transaction or the change is solely for the benefit of the company; (ii) is solely for the benefit of the company; (iii) is with
the controlling shareholder or another person in which the controlling shareholder has an interest and the transaction is in accordance
with the terms of a framework agreement that was duly approved; (iv) is with the controlling shareholder or another person in
which the controlling shareholder has an interest, the purpose of which is a transaction of theirs with a third party or a joint
proposal to enter into a transaction with a third party, and the terms of the transaction that apply to the controlling shareholder
are not significantly different from the terms that apply to the controlling shareholder or an entity controlled by him or her
(while taking into account the extent of their respective involvement in the transaction); (v) is among companies controlled by
the controlling shareholder, or between the public company and the controlling shareholder or another person in which the controlling
shareholder has a personal interest, and the transaction is on market terms, within the ordinary course of business and does not
harm the company; or (vi) on the date of approval of the extraordinary transaction by the board of directors and audit committee,
the shareholders who do not have personal interest in the approval of the said transactions do not hold more than 2% of the voting
rights in the company. In addition, under such regulations, directors’ compensation and employment arrangements in a public
company do not require the approval of the shareholders if both the compensation committee (or the audit committee acting in lieu
of a compensation committee pursuant to the Companies Law) and the board of directors agree that such arrangements are solely
for the benefit of the company. Employment and compensation arrangements for an office holder that is a controlling shareholder
of a public company, or the provision of directors and officers insurance for the chief executive officer, do not require shareholder
approval if certain criteria are met. The Board, following the prior determination of the Audit Committee or Compensation Committee,
as applicable, may also determine that the compensation being offered to certain office holders (including directors) is an engagement
which, pursuant to the leniencies set forth in the Relief Regulations, can be entered into by a company immediately, with the
approval by the shareholders being deferred to the next shareholder meeting to be called by the Company, is such compensation
is consistent with compensation policy of the company which was approved by the shareholders of the company in accordance with
the Companies Law, and are no more beneficial to the recipient as such similar compensation previously granted to other holders
of the same office.



Private
Placements



Under
the Companies Law, if (i) as a result of a private placement a person would become a controlling shareholder or (ii) a private
placement will entitle investors to receive 20% or more of the voting rights of a company as calculated before the private placement,
and all or part of the private placement consideration is not in cash or in public traded securities or is not in market terms
and if as a result of the private placement the holdings of a substantial shareholder shall increase or as a result of it a person
shall become a substantial shareholder, then in either case, the allotment must be approved by the board of directors and by the
shareholders of the company. A “substantial shareholder” in connection with a private placement as set forth above,
is defined as a shareholder who holds five percent or more of the company’s outstanding share capital or voting rights,
and which assumes the exercise of all of the securities convertible into shares either held by that person prior to such private
placement or offered to such person under the private placement. In order for the private placement to be on “market terms”
the board of directors has to determine, on the base of detailed explanation, that the private placement is on market terms, unless
proven otherwise. Otherwise, under the Companies Law and the regulations promulgated thereunder, a private placement of securities
does not require approval at a general meeting of the shareholders of a company; provided however, that in other special circumstances,
such as a private placement completed in lieu of a special tender offer, or a private placement under circumstances which qualifies
as a related party transaction requiring shareholder approval, approval at a general meeting of the shareholders of a company
is then also required. A Registered Direct Offering in the United States is generally considered a private placement under the
Companies Law.





128






Access
to corporate records



Under
the Companies Law, shareholders are provided access to minutes of our general meetings, our shareholders register and principal
shareholders register, our amended and restated articles of association, our financial statements and any document that we are
required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders
may request to be provided with any document related to an action or transaction requiring shareholder approval under the related
party transaction provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or
if such denial is necessary to protect our interest or protect a trade secret or patent.



Modification
of class rights



Under
the Companies Law and our amended and restated articles of association, the rights attached to any class of share, such as voting,
liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that
class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set
forth in our amended and restated articles of association. The enlargement of an existing class of shares or the issuance of additional
shares thereof, shall not be deemed to modify the rights attached to the previously issued shares of such class or of any other
class, unless otherwise provided by the terms of the shares.



Provisions
Restricting Change in Control of Our Company



As
described below, certain provisions of the Companies Law and/or our amended and restated articles of association may have an effect
of delaying, deferring or preventing a change in control.



Full
Tender Offer



A
person wishing to acquire shares of an Israeli public 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 an Israeli public 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 respond to or accept the offer hold less than 5% of the issued and outstanding share capital of the
company or of the applicable class of the shares, and more than half of the shareholders who do not have a personal interest in
the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation
of law. However, a tender offer will be accepted if the shareholders who do not accept it hold less than 2% of the issued and
outstanding share capital of the company or of the applicable class of the shares.



Upon
a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder
accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition the Israeli
court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined
by the court. However, under certain conditions, the offeror may determine in the terms of the tender offer that an offeree who
accepted the offer will not be entitled to petition the Israeli court as described above.





129






If
the shareholders who did not respond or accept the tender offer hold at least 5% 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.



The
description above regarding a full tender offer shall also apply, with necessary changes, when a full tender offer is accepted
and the offeror has also offered to acquire all of the company’s securities.



Special
Tender Offer



The
Companies Law provides that an acquisition of shares of an Israeli public 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 at least 25% of the voting rights in the company. 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 special tender offer if
as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there
is no other shareholder of the company who holds more than 45% of the voting rights in the company.



These
requirements do not apply if the acquisition (i) occurs in the context of a private offering, on the condition that the shareholders’
meeting approved the acquisition as a private offering whose purpose is to give the acquirer at least 25% of the voting rights
in the company if there is no person who holds at least 25% of the voting rights in the company, or as a private offering whose
purpose is to give the acquirer 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights
in the company; (ii) was from a shareholder holding at least 25% of the voting rights in the company and resulted in the acquirer
becoming a holder of at least 25% of the voting rights in the company; or (iii) was from a holder of more than 45% of the voting
rights in the company and resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company.



The
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 special tender offer is accepted by a majority of the votes of those offerees
who gave notice of their position in respect of the offer; in counting the votes of offerees, the votes of a holder in control
of the offeror, a person who has personal interest in acceptance of the special tender offer, a holder of at least 25% of the
voting rights in the company, or any person acting on their or on the offeror’s behalf, including their relatives or companies
under their control, are not taken into account.



In
the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the
advisability of the offer or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons
for its abstention.



An
office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is
to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable
to the potential purchaser and shareholders for damages resulting from his or her acts, unless such office holder acted in good
faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the
target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further
negotiate with third parties in order to obtain a competing offer.



If
a special tender offer was accepted by a majority of the shareholders who announced their stand on such offer, then shareholders
who did not respond to the special offer or had objected to the special tender offer may accept the offer within four days of
the last day set for the acceptance of the offer. In the event that a special tender offer is accepted, then the purchaser or
any person or entity controlling it and any corporation controlled by them shall refrain from making a subsequent tender offer
for the purchase of shares of the target company and may not execute a merger with the target company for a period of one year
from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial
special tender offer.





130






Under
the Companies Regulations (Relief for Public Companies whose Shared are Traded on Exchanges Outside of Israel), 5760-2000 (the
“Foreign Listing Relief Regulations”), the above requirements for a special tender offer do not apply in instances
whereby according to the laws of the foreign jurisdiction there are limitations regarding the acquisition of a controlling interest
in the company of any specified portion or the acquisition of a controlling interest of any specified portion necessitates an
offer by the potential acquirer of a controlling interest to acquire shares from amongst the publicly traded shares. The Israeli
Securities Authority is of the view that US securities laws and exchange regulations of various exchanges do not purport to limit
the acquisition of controlling interests in a company, do not require the potential acquirer of a controlling interest to make
an offer to acquire shares from the public, and as such Israeli companies that are publicly traded in the United States of America
cannot benefit from the special tender offer waiver pursuant to the Foreign Listing Relief Regulations and are thus subject to
the general provisions of the Companies Law which require a special tender offer as outlined above.



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 shareholders, by a majority of each party’s
shares that are voted on the proposed merger at a shareholders’ meeting.



The
board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion
there exists a reasonable concern that, as a result of a proposed merger, the surviving company will not be able to satisfy its
obligations towards its creditors, taking into account the financial condition of the merging companies. If the board of directors
has determined that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors
of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli
Registrar of Companies.



For
purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the
shares voting at the shareholders’ meeting (excluding abstentions) that are held by parties other than the other party to
the merger, any person who holds 25% or more of the means of control (See “Management – Audit Committee – Approval
of Transactions with Related Parties” for a definition of means of control) of the other party to the merger or any one
on their behalf including their relatives (See “Item 6. Directors, Senior Management and Employees - C. Board Practices
- External Directors – Qualifications of External Directors” for a definition of relatives) or corporations controlled
by any of them, vote against the merger.



In
addition, if the non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class
of shareholders, and such separate class voting may also include any classes of otherwise non-voting shares.



If
the transaction would have been approved but for the separate approval of each class of shares or the exclusion of the votes of
certain shareholders as provided above, a court may still rule that the company has approved 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 appraisal of the merging companies’ value and the consideration offered to the shareholders.



Under
the Companies Law, each merging company must send a copy of the proposed merger plan to its secured creditors. Unsecured creditors
are entitled to receive notice of the merger, as provided by the regulations promulgated under the Companies Law. 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 the target
company. The court may also give instructions in order 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 with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies
was obtained.





131






On
April 25, 2017, the boards of directors of each of Kitov Parent and Kitov Pharmaceuticals approved a merger between the two entities,
with Kitov Parent remaining as the surviving entity. See Item 4.C – Organizational Structure for more information on this
merger, which we expect to be completed prior to the end of the second quarter of 2017.



Tax
Issues



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



Amended
and Restated Articles of Association



Our
amended and restated articles of association contain provisions that could delay or prevent changes in control or changes in our
management. These provisions include the following:



| | ● | no
    cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    right of our board of directors to elect a director to fill a vacancy, which may prevent shareholders from being able to fill
    vacancies on our board of directors;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | a
    majority of the members of our board of directors are required to be residents of Israel, unless our center of management
    has been transferred to another country by a decision of our board of directors resolved by a supermajority of three-quarters
    of the participating votes at such board of directors meeting;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    size of our board of directors shall be no more than nine (including any external directors required under applicable law);
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    directors, except for our external directors, are divided into three classes, as nearly equal in number as possible.; and,
    at each annual general meeting, the term of one class of directors expires, and the directors of such class are re-nominated
    to serve an additional three year term that expires at the annual general meeting held in the third year following such election,
    with this process continues indefinitely; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | the
    provisions in our amended and restated articles of association governing the number of directors, the election and removal
    of directors, the division of the board of directors into classes, and the establishment of the center of management may only
    be changed by the shareholders with a majority of (a) 75% of the voting rights participating and voting on the matter in the
    applicable general meeting and (b) more than 47.9% of all of the voting rights in Kitov Parent as of the record date established
    for the applicable general meeting.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Changes
in Our Capital



The
general meeting may, by a simple majority vote of the shareholders attending the general meeting:



| | ● | increase
    Kitov Parent’s registered share capital by the creation of new shares from the existing class or a new class, as determined
    by the general meeting;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | cancel
    any registered share capital which have not been taken or agreed to be taken by any person;
| | - | ------------------------------------------------------------------------------------------------------



| | ● | consolidate
    and divide all or any of its share capital into shares of larger nominal value than its existing shares;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | ● | subdivide
    Kitov Parent’s existing shares or any of them, Kitov Parent’s share capital or any of it, into shares of smaller
    nominal value than is fixed;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | reduce
    Kitov Parent’s share capital and any fund reserved for capital redemption in any manner, and with and subject to any
    incident authorized, and consent required, by the Companies Law; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | reduce
    shares from the issued and outstanding share capital of Kitov Parent, in such manner that those shares shall be cancelled
    and any nominal par value paid for those shares will be registered at Kitov Parent’s books as capital fund, which shall
    be deemed as a premium paid on those shares which shall remain in the issued and outstanding share capital of Kitov Parent.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





132






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



Clinical
Trial Services Agreements – Phase III Clinical Trial



Master
Research Services Agreement with Java Clinical Research Ltd.



On
February 9, 2014, we entered into a Master Research Services Agreement with Java Clinical Research Ltd., or Java, a contract research
organization based in Dublin, Ireland. According to the terms of the agreement, Java will manage the Phase III clinical trial
for KIT-302, including preparation and filing of the requests to the ethics boards and the necessary regulatory bodies of the
European Union, recruiting the tested subjects, employment of the primary researchers, identification and evaluation of the medical
centers and their subsequent management throughout the trial period and overall management of the trial process through its completion.
We engaged with third party medical centers for the performance of our Phase III clinical trial through Java. The total cost of
the agreement with Java, including the cost of all service providers with which we have engaged through Java, with respect to
the Phase III clinical trial amounted to approximately $2.5 million.



The
Master Research Services Agreement was intended to remain in effect until Java provided all services through the completion of
our Phase III trial of KIT-302.



Services
Agreement with DABL Limited



On
August 2, 2013, we entered into a services agreement with DABL Limited, or DABL, an Irish company based in Dublin, Ireland, in
the ambulatory blood pressure monitoring technologies field. According to the agreement, DABL will provide protocol consultation
services and coordinate the ambulatory blood pressure monitoring (ABPM) procedures and the analysis of the blood pressure tests
during and after our Phase III trial of KIT-302. DABL’s technology enables the collection of data from hundreds of blood
pressure tests during the day on each patient during the clinical trials as opposed to the traditional individual tests that yield
many fewer results for statistical analysis during the same time frame.



The
above services agreement was intended to be in effect until DABL provided all services including the statistical analysis of results
the blood pressure tests following our Phase III trial of KIT-302.



Clinical
Trial Services Agreements - Renal Function Clinical Trial



Work
Order with Java



On
September 7, 2016 we entered into an additional Work Order with Java, under the Master Research Services Agreement the term of
which was extended by such Work Order, pursuant to which Java will manage the renal function clinical trial for KIT-302, including
preparation and filing of the requests to the ethics boards and the necessary regulatory bodies of the U.K., recruiting the trial
participants, employment of the primary researchers, identification and evaluation of the medical centers and their subsequent
management throughout the trial period and overall management of the trial process through its completion. We also have directly
engaged with third party medical centers for the performance of our renal function clinical trial being managed by Java. The Master
Research Services Agreement will remain in effect until Java has provided all services through the completion of our renal function
clinical trial. The parties have customary termination rights and either party may terminate the Master Research Services Agreement
(or any work thereunder) upon 60 days’ notice.





133






Service
Agreement with DABL



On
July 26, 2016 we entered into a new services agreement with DABL in connection with the renal function clinical trial.  According
to the agreement, DABL will provide protocol consultation services and coordinate the ambulatory blood pressure monitoring (ABPM)
procedures and the analysis of the blood pressure tests during and after our renal function clinical trial. The services agreement
will remain in effect until DABL has provided all services provided for in the agreement. However, we may terminate the agreement
at any time upon 90 days’ notice, and both parties have customary termination rights.



We
estimate that the total cost of the agreement with Java, as well the cost of all other service providers with respect to the renal
function clinical trial, will amount to approximately $1.3 million, assuming completion of the clinical trial as anticipated.



Development
Services Agreement with Dexcel



On
April 1, 2014, we entered into a Development Services Agreement with Dexcel Ltd., or Dexcel, a global pharmaceutical company,
which has been involved in the manufacture and marketing of more than 55 branded and generic products. The agreement provides
for Dexcel to develop the formulation for KIT-302 and the subsequent stability testing and manufacturing scale-up in quantities
adequate for submission of an NDA to the FDA. Dexcel’s services include performing compatibility testing of APIs with excipients,
screening to find at least two prototypes and identifying analytical methods for product analysis. We agreed to bear the cost
of the APIs as well as other materials or means required for Dexcel to perform the services under the agreement. In exchange for
these services, we will pay Dexcel: (i) $2 million in cash in four equal installments ($500,000 which was paid upon execution
of the agreement, $500,000 which was paid upon attainment of the second milestone in May 2015, $500,000 that was paid in May 2016
as a result of the attainment of the fifth milestone, and the remaining $500,000 to be paid by the end of July 2016 based on the
remaining milestone during the development and manufacturing period); and (ii) in our ordinary shares having an aggregate value
of $1.5 million issued in three equal installments (the first issuance of 157,783 ordinary shares was made upon execution of the
agreement, the second issuance of 597,511 ordinary shares was made upon attainment of the second milestone in May 2015, and the
final issuance of 3,009,888 ordinary shares was made on June 19, 2016 in connection with the attainment of the fifth milestone
).



In
addition, in exchange for a right of first negotiation with regard to future global marketing rights for KIT-302 and for an option
to negotiate the future commercial manufacture of KIT-302 Dexcel agreed to pay us $500,000 in two equal installments based on
milestones during the development and manufacturing period (of which the first payment of $250,000 was made in May 2015 upon the
attainment of the second development milestone, and the remaining $250,000 was paid in May 2016 as a result of the attainment
of the fifth development milestone). Under the terms of the agreement, in the event we intend to enter into negotiations with
any third party to enter into a commercial marketing or licensing agreement for the product, we are obligated to notify Dexcel
of our intention to do so, and Dexcel has the right, within 21 days, to notify us whether it wishes to negotiate with us on mutually
agreeable and commercially reasonable terms for the rights, in which case we are required to negotiate exclusively with Dexcel
in good faith in an attempt to reach a mutual agreement with 60 days. If Dexcel does not so notify us, or if upon expiration of
this 60 day period the parties are unable to agree in good faith upon its terms and conditions, we will be free to enter into
a commercial agreement with any party on any terms we determine. We have formally notified Dexcel that we intend to enter into
negotiations with third parties to enter into a commercial marketing or licensing agreement for the KIT-302 product. Dexcel has
not notified us within the requisite 21 days whether or not it wishes to negotiate with us on mutually agreeable and commercially
reasonable terms for these rights. As such, we believe that we are free to enter into a commercial agreement with any party on
any terms we determine.



On
June 9, 2015 we, together with Dexcel, successfully completed the performance of a pilot pharmacokinetic clinical trial, or Pilot
PK Study, which commenced on March 31, 2015 in Ichilov Medical Center in Tel Aviv. The objective of the Pilot PK Study was to
demonstrate that the concentration of KIT-302 in the blood of the subjects is comparable to the concentrations observed in the
administration of the two existing, approved drugs (celecoxib and amlodipine besylate, which are the active components of KIT-302).
For the purpose of this Pilot PK Study, Dexcel manufactured two prototypes of the KIT-302 final formulation, based on the two
existing approved drugs.



134






On
May 10, 2016 we announced that we, together with Dexcel, had successfully completed a final conclusive pharmacokinetic (PK) bioequivalence
(BE) study, or the Final PK Study. The objective of this study was to check the pharmacokinetics of the combination drug produced
in a manufacturing setting in order to show that the blood levels achieved with our combination are the same as those obtained
with the individual components. The Final PK Study compared the PK of KIT-302 which is a fixed dose combination consisting of
celecoxib (200 mg), indicated for osteoarthritis pain, and amlodipine (10 mg), indicated for high blood pressure, to off-the-shelf
branded 200 mg celecoxib capsules and 10 mg amlodipine tablets. A similar PK bioequivalence study for KIT-302, containing a lower
dosage (2.5 mg) of amlodipine, was completed during the third quarter of 2016, and showed similar bioequivalence results to those
found in the Final PK Study. On June 19, 2016, we entered into an amendment with Dexcel with respect to the conduct of this additional
study, for which we will pay Dexcel approximately $200,000.



On
June 28, 2016 we announced that Dexcel has successfully completed an initial stability study for KIT-302. Additional stability
studies required for the NDA are ongoing.



According
to the Development Services Agreement with Dexcel, any new intellectual property rights resulting from the development made by
Dexcel which are applicable to manufacture, research, development, making of, use, sale, production commercialization and distribution
of KIT-302 shall be jointly and equally owned (50%/50%) by Dexcel and Kitov.We
anticipate that in the near future, we will be filing an international patent application, in partnership with Dexcel, which is
related to pharmaceutical formulations of celecoxib and amlodipine and methods of preparing the same. Under the Development Services
Agreement, Dexcel granted Kitov and Kitov granted Dexcel each a fully-paid, non-exclusive, perpetual world-wide license to the
jointly and equally owned new intellectual property rights. Accordingly, we expect that there will be no royalty payments due
to Dexcel for our use of this jointly and equally owned new intellectual property rights.



The
Development Services Agreement will remain in effect until Dexcel has provided all services through the completion of manufacturing
scale-up in quantities adequate for submission of an NDA to the FDA as well as stability testing. However, the parties have customary
termination rights and either party may terminate the agreement upon 90 days’ notice.



Other
Agreements



For
a description of other agreements, please see "Item 3. Major Shareholders and Related Party Transactions – D. Risk
Factors – Risks Related to Our Business and Regulatory Matters", "Item 4. Information on the Company – B.
Business Overview – Services and License Agreements", "Item 4. Information on the Company – B. Business
Overview – Intellectual Property", "Item 4. Information on the Company- B. Business Overview - Intellectual Property
- Exclusive License Agreement with Yissum", "Item 5. Operating and Financial Review and Prospects – B. Liquidity
and Capital Resources", "Item 7. Major Shareholders and Related Party Transactions – A. Major Shareholders –
Changes in Percentage Ownership by Major Shareholders", "Item 7. Major Shareholders and Related Party Transactions –
B. Related Party Transactions – TyrNovo Ltd.", "Item 7. Major Shareholders and Related Party Transactions –
B. Related Party Transactions" – August 2015 Loan Agreements", "Item 7. Major Shareholders and Related Party
Transactions – B. Related Party Transactions – Consulting Agreement with Lior Tamar Investments Ltd.", "Item
7. Major Shareholders and Related Party Transactions – B. Related Party Transactions – Share Transfer Agreement with
Kitov Pharmaceuticals".



For
information on exemption and indemnification letters granted to our officers and directors, please see “Item 6 – Directors,
Senior Management and Employees – C. Board Practices – Exemption, Insurance and Indemnification of Directors and Officers.”



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



Exchange
Controls



There
are currently no material Israeli currency control restrictions on payments of dividends or other distributions with respect to
our securities or the proceeds from the sale of our securities, except under certain circumstances, for shareholders who are subjects
of countries that are, or have been, in a state of war with Israel or otherwise as set forth in this section and under “Item
10E. Additional Information — Taxation.” However, legislation remains in effect pursuant to which currency
controls can be imposed by administrative action at any time. Israeli residents have an obligation to file reports with the Bank
of Israel regarding certain transactions.





135






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



The
following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership
and disposition of our ordinary shares, ADSs or warrants (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 or other taxing jurisdiction.



Israeli
Tax Considerations and Government Programs



The
following is a summary of the material Israeli tax laws applicable to us, and some Israeli Government programs benefiting us.
This section also contains a discussion of some Israeli tax consequences to persons owning our Shares. This summary does not discuss
all the aspects of Israeli 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 traders
in securities or persons that own, directly or indirectly, 10% or more of our outstanding voting capital, all of whom are subject
to special tax regimes not covered in this discussion. Some parts of this discussion are based on a new tax legislation which
has not been subject to judicial or administrative interpretation. The discussion should not be construed as legal or professional
tax advice and does not cover all possible tax considerations.



SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE ISRAELI OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF OUR SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.



General
Corporate Tax Structure in Israel



Israeli
resident companies are generally subject to corporate tax, currently at the rate of 24% for 2017 of a company’s taxable
income (to be reduced to 23% in 2018 and thereafter). The corporate tax rate for the tax years 2015 and 2016 was 26.5% and 25%
respectively. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise may be considerably
less. Capital gains derived by an Israeli resident company are subject to tax at the prevailing corporate tax rate.



Under
Israeli tax legislation, a corporation will be considered as an “Israeli resident company” if it meets one of the
following: (i) it was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.



Taxation
of Our Shareholders



Capital
Gains



Capital
gain tax is imposed on the disposal of capital assets by an Israeli resident, and on the disposal of such assets by a non- Israel
resident if those assets are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation,
or (iii) represent, directly or indirectly, rights to assets located in Israel. The Israeli Income Tax Ordinance of 1961 (New
Version) (the “Ordinance”) distinguishes between “Real Gain” and the “Inflationary Surplus.”
Real Gain is the excess of the total capital gain over Inflationary Surplus computed generally on the basis of the increase in
the Israeli CPI between the date of purchase and the date of disposal.



In
general, the capital gain accrued by individuals on the sale of our Shares will be taxed at the rate of 25%. However, if the individual
shareholder is a “Controlling Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with
another, 10% or more of one of the Israeli resident company’s means of control) at the time of sale or at any time during
the preceding 12 months period, such gain will be taxed at the rate of 30%.



The
real capital gain derived by corporations will be generally subject to a corporate tax rate of 25% in 2016 and 24% in 2017.





136






Individual
and corporate shareholder dealing in securities in Israel are taxed at the tax rates applicable to business income – 25%
for corporations in 2016 and 24% in 2017 and a marginal tax rate of up to 48% and 47% for an individual in 2016 and in 2017 and
thereafter, respectively, plus a 2% excess tax in 2016 and 3% in 2017 and thereafter, which is levied on individuals whose taxable
income in Israel exceeds NIS 810,720 in 2016 and 640,000 in 2017 and thereafter (linked to the Israeli consumer price index) Notwithstanding
the foregoing, capital gain derived from the sale of our Shares by a non-Israeli shareholder may be exempt under the Ordinance
from Israeli taxation provided that the following cumulative conditions are met: (i) the shares were purchased upon or after the
registration of the securities on the stock exchange (this condition shall not apply to shares purchased on or after January 1,
2009), (ii) the seller does not have a permanent establishment in Israel to which the derived capital gain is attributed, (iii)
if the seller is a corporation, no more than 25% of its means of control are held, directly and indirectly, by an Israeli resident
shareholders, and (iv) if the seller is a corporation, there is no Israeli Resident that is entitled to 25% or more of the revenues
or profits of the corporation directly or indirectly. In addition, the sale of shares may be exempt from Israeli capital gain
tax under the provisions of an applicable tax treaty. For example, the U.S.-Israel Double Tax Treaty exempts U.S. resident from
Israeli capital gain tax in connection with such sale, provided (i) the U.S. resident owned, directly or indirectly, less than
10% of an Israeli resident company’s voting power at any time within the 12 month period preceding such sale; (ii) the seller,
being an individual, is present in Israel for a period or periods of less than 183 days at the taxable year; and (iii) the capital
gain from the sale was not derived through a permanent establishment of the U.S. resident in Israel.



Either
the purchaser, the Israeli stockbrokers or financial institution through which the shares are held is obliged, subject to the
above mentioned exemptions, to withhold tax upon the sale of securities from the real capital gain at the rate of 25% in respect
of a corporation and/or an individual.



At
the sale of securities traded on a stock exchange a detailed return, including a computation of the tax due, must be filed and
an advanced payment must be paid on January 31 and June 30 of every tax year in respect of sales of securities made within the
previous six months. However, if all tax due was withheld at source according to applicable provisions of the Ordinance and regulations
promulgated thereunder the aforementioned return need not be filed and no advance payment must be paid. Capital gain is also reportable
on the annual income tax return.

Dividends



A
distribution of dividend by our company from income attributed to a Preferred Enterprise will generally be subject to withholding
tax in Israel at the following tax rates: Israeli resident individuals - 20% with respect to dividends to be distributed as of
2014; Israeli resident companies – 0% for a Preferred Enterprise; Non-Israeli residents – 20% with respect to dividends
to be distributed as of 2014, subject to a reduced rate under the provisions of any applicable double tax treaty, subject to an
approval from the Israeli Tax Authorities. A distribution of dividends from income, which is not attributed to a Preferred Enterprise
to an Israeli resident individual, will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will apply
if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of distribution or at any
time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation, such dividend
will be exempt from income tax provided the income from which such dividend is distributed was derived or accrued within Israel.



The
Ordinance provides that a non-Israeli resident (either individual or corporation) is generally subject to an Israeli income tax
on the receipt of dividends at the rate of 25% (30% if the dividends recipient is a “Controlling Shareholder” (as
defined above), at the time of distribution or at any time during the preceding 12 months period); those rates are subject to
a reduced tax rate under the provisions of an applicable double tax treaty. Thus, under the U.S.-Israel Double Tax Treaty the
following rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the U.S.
resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend
and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli
resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior
taxable year (if any) consists of certain type of interest or dividends (other than dividend or interest received from subsidiary
corporations, 50 percent 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 tax rate is 12.5%, (ii) if both the conditions mentioned in section
(i) above are met and the dividend is paid from an Israeli resident company’s income which was entitled to a reduced tax
rate applicable to a Preferred Enterprise as defined in the Israel’s Encouragement of Capital Investments Law (1959) –
the tax rate is 15% and (iii) in all other cases, the tax rate is 25%. The aforementioned rates under the Israel U.S. Double Tax
Treaty will not apply if the dividend income was derived through a permanent establishment of the U.S. resident in Israel.





137






A
non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns
in Israel with respect to such income, provided that (i) such income was not generated from business conducted in Israel by the
taxpayer, and (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required
to be filed.



Financial
institutions through which shareholders typically hold securities are generally required, subject to any of the foregoing exemptions,
reduced tax rates and the demonstration of a shareholder regarding his, her or its foreign residency, to withhold tax upon the
distribution of dividend at the rate of 25%, so long as the shares are registered with a Nominee Company (for corporations and
individuals).



Foreign
Exchange Regulations



Non-residents
of Israel who hold our Shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and
winding up of our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However,
Israeli income tax is generally required to have been paid or withheld on these amounts. In addition, the statutory framework
for the potential imposition of currency exchange control has not been eliminated, and may be restored at any time by administrative
action.



Estate
and Gift Tax



Israeli
law presently does not impose estate or gift taxes.



U.S.
Federal Income Tax Considerations



The
following is a description of certain U.S. federal income tax consequences relating to the acquisition, ownership and disposition
of our ADSs and warrants by a holder. This description addresses only the U.S. federal income tax consequences to holders that
are initial purchasers of our ADSs and warrants pursuant to this offering and that will hold such ADSs and warrants as capital
assets. This description does not address tax considerations applicable to holders that may be subject to special tax rules, including,
without limitation:



| | ● | banks,
    financial institutions or insurance companies;
| | - | ---------------------------------------------------------



| | ● | real
    estate investment trusts, regulated investment companies or grantor trusts;
| | - | ------------------------------------------------------------------------------------



| | ● | dealers
    or traders in securities, commodities or currencies;
| | - | ----------------------------------------------------------------



| | ● | tax
    exempt entities or organizations;
| | - | -----------------------------------------



| | ● | certain
    former citizens or residents of the United States;                                                                                                                             
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                            
| | ● | persons
    that received our ADSs or warrants as compensation for the performance of services;                                                                                            
| |   |                                                                                                                                                                                            
| | ● | persons
    that will hold our ADSs or warrants as part of a “hedging,” “integrated” or “conversion”
    transaction or as a position in a “straddle” for U.S. federal income tax purposes;



| | ● | partnerships
    (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders
    that will hold our ADSs or warrants through such an entity;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | U.S.
    Holders (as defined below) whose “functional currency” is not the U.S. dollar; or
| | - | ------------------------------------------------------------------------------------------



| | ● | holders
    that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares.
| | - | ------------------------------------------------------------------------------------------------------------------------





138






Moreover,
this description does not address the U.S. federal estate, gift, or alternative minimum tax consequences, or any U.S. state, local
or non-U.S. tax consequences of the acquisition, ownership and disposition of our ADSs and warrants.



This
description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing, proposed and temporary U.S.
Treasury Regulations promulgated thereunder and administrative and judicial interpretations thereof, in each case as in effect
and available on the date hereof. All the foregoing is subject to change, which change could apply retroactively and could affect
the tax consequences described below. There can be no assurances that the U.S. Internal Revenue Service, or IRS, will not take
a different position concerning the tax consequences of the acquisition, ownership and disposition of our ADSs and warrants or
that such a position would not be sustained. Holders should consult their own tax advisers concerning the U.S. federal, state,
local and foreign tax consequences of acquiring, owning and disposing of our ADSs and warrants in their particular circumstances.



For
purposes of this description, the term “U.S. Holder” means a beneficial owner of our ADSs or warrants that, for U.S.
federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation (or entity treated as a corporation
for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the
District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv)
a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration
and one or more U.S. persons have the authority to control all of its substantial decisions or (y) that has elected to be treated
as a domestic trust for U.S. federal income tax purposes.



A
“Non-U.S. Holder” is a beneficial owner of our ADSs or warrants that is neither a U.S. Holder nor a partnership (or
other entity treated as a partnership for U.S. federal income tax purposes).



If
a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our ADSs and warrants,
the U.S. federal income tax consequences relating to an investment in our ADSs and warrants will depend in part upon the status
of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor regarding the
U.S. federal income tax consequences of acquiring, owning and disposing of our ADSs and warrants in its particular circumstances.



In
general, if you hold ADSs, you will be treated as the holder of the underlying ordinary shares represented by those ADSs for U.S.
federal income tax purposes. Accordingly, gain or loss generally will not be recognized if you exchange ADSs for the underlying
ordinary shares represented by those ADSs.



Persons
considering an investment in our ADSs or warrants should consult their own tax advisors as to the particular tax consequences
applicable to them relating to the acquisition, ownership and disposition of our ADSs and warrants, including the applicability
of U.S. federal, state and local tax laws and non-U.S. tax laws.



Taxation
of Dividends and Other Distributions on Our ADSs



Subject
to the discussion below under “Passive Foreign Investment Company Consequences,” if you are a U.S. Holder, the gross
amount of any distribution made to you with respect to our ADSs before reduction for any Israeli taxes withheld therefrom, generally
will be includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles. Non-corporate U.S. Holders may qualify for the lower
rates of taxation with respect to dividends on ADSs applicable to long-term capital gains (i.e., gains from the sale of capital
assets held for more than one year), provided that certain conditions are met, including certain holding period requirements and
the absence of certain risk reduction transactions. Moreover, such lower rate of taxation shall not apply if we are a PFIC for
the taxable year in which it pays a dividend, or was a PFIC for the preceding taxable year. However, such dividends will not be
eligible for the dividends received deduction generally allowed to corporate U.S. Holders. To the extent that the amount of any
distribution by us exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles,
it will be treated first as a tax-free return of your adjusted tax basis in our ADSs and thereafter as either long-term or short-term
capital gain depending upon whether the U.S. Holder has held our ADSs for more than one year as of the time such distribution
is received.





139






If
you are a U.S. Holder, dividends paid to you with respect to our ADSs will be foreign source income for foreign tax credit purposes.
Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from your taxable income or credited
against your U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, dividends generally constitute “passive category income,”
or, in the case of certain U.S. Holders, “general category income.” A foreign tax credit for foreign taxes imposed
on distributions may be denied if you do not satisfy certain minimum holding period requirements. The rules relating to the determination
of the foreign tax credit are complex, and you should consult your tax advisor to determine whether and to what extent you will
be entitled to this credit.



The
amount of a distribution paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency calculated
by reference to the spot exchange rate on the day the U.S. Holder receives the distribution, regardless of whether the foreign
currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. Holder realizes on a subsequent
conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in foreign
currency are converted into U.S. dollars on the day they are received, a U.S. Holder generally should not be required to recognize
foreign currency gain or loss in respect of the dividend.



Subject
to certain limitations, including the Medicare tax, discussed below, “qualified dividend income” received by a non-corporate
U.S. Holder should be subject to tax at a preferential maximum tax rate of 20 percent. Distributions taxable as dividends paid
on the our ADSs should qualify for the preferential 20 percent rate provided that either: (i) we are entitled to benefits under
the income tax treaty between the United States and Israel (the “Treaty”) or (ii) our ADSs will be treated as readily
tradable on an established securities market in the United States and certain other requirements are met. We believe that we will
be entitled to benefits under the Treaty and that our ADSs will become readily tradable on an established securities market in
the United States, and therefore any dividend distributions with respect to our ADSs should be “qualified dividends”
eligible for the preferential tax rate. However, no assurance can be given that our ADSs will be treated as readily tradable.
The preferential rate does not apply unless certain holding period requirements are satisfied. With respect to our ADSs, the U.S.
Holder must have held such ADSs for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date.
The preferential rate also does not apply to dividends received from a passive foreign investment company (or classified as a
passive foreign investment company in the preceding taxable year) or in respect of certain hedged positions or in certain other
situations. The legislation enacting the preferential tax rate on qualified dividends contains special rules for computing the
foreign tax credit limitation of a taxpayer who receives dividends subject to the preferential tax rate. U.S. Holders of our ADSs
should consult their own tax advisors regarding the effect of these rules in their particular circumstances.



Subject
to the discussion below under “Backup Withholding Tax and Information Reporting Requirements,” if you are a Non-U.S.
Holder, you generally will not be subject to U.S. federal income (or withholding) tax on dividends received by you on your ADSs,
unless:



| | ● | you
    conduct a trade or business in the U.S. and such income is effectively connected with that trade or business (and, if required
    by an applicable income tax treaty, the dividends are attributable to a permanent establishment or fixed base that such holder
    maintains in the U.S.); or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | you
    are an individual and have been present in the U.S. for 183 days or more in the taxable year of such sale or exchange and
    certain other conditions are met.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sale,
Exchange or Other Disposition of Our ADSs and Warrants



Subject
to the discussion below under “Passive Foreign Investment Company Consequences,” if you are a U.S. Holder, you generally
will recognize gain or loss on the sale, exchange or other disposition of our ADSs and warrants equal to the difference between
the amount realized on such sale, exchange or other disposition and your adjusted tax basis in our ADSs and warrants, and such
gain or loss will be capital gain or loss. The adjusted tax basis in an ADS and warrant generally will be equal to the cost of
such ADS and warrant. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other disposition of an
ADS or warrant is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period determined
at the time of such sale, exchange or other disposition for such ADS or warrant exceeds one year (i.e., such gain is long-term
capital gain). The deductibility of capital losses is subject to limitations. Any such gain or loss generally will be treated
as U.S. source income or loss for foreign tax credit limitation purposes. A foreign tax credit for foreign taxes imposed on capital
gains may be denied if you do not satisfy certain minimum holding period requirements. The rules relating to the determination
of the foreign tax credit are complex, and it is possible that the ability of a U.S. Holder to claim a foreign tax credit for
any such Israeli tax will be limited. You should consult your tax advisor to determine whether, and to what extent, you will be
entitled to this credit.



140






Subject
to the discussion below under “Backup Withholding Tax and Information Reporting Requirements,” if you are a Non-U.S.
Holder, you generally will not be subject to U.S. federal income or withholding tax on any gain realized on the sale or exchange
of such ADSs and warrants unless:



| | ● | such
    gain is effectively connected with your conduct of a trade or business in the United States (and, if required by an applicable
    income tax treaty, the gain is attributable to a permanent establishment or fixed base that you maintain in the United States);
    or
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | you
    are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange
    and certain other conditions are met.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Passive
Foreign Investment Company Consequences



We
may be classified as a Passive Foreign Investment Company (PFIC). If we were to be so classified in any taxable year, a U.S. Holder
would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income
tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current
basis.



A
non-U.S. corporation will be classified as a PFIC for federal income tax purposes in any taxable year in which, after applying
certain look-through rules with respect to the income and assets of subsidiaries, either:



| | ● | at
    least 75% of its gross income is “passive income”; or
| | - | ------------------------------------------------------------



| | ● | at
    least 50% of the average quarterly value of its total gross assets (which may be determined in part by the market value of
    our ADSs and warrants, which is subject to change) is attributable to assets that produce “passive income” or
    are held for the production of passive income.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Passive
income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions,
the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason
of the temporary investment of funds raised in offerings of our ADSs and warrants. If a non-U.S. corporation owns directly or
indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the
PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate
share of the other corporation’s income. If we are classified as a PFIC in any year with respect to which a U.S. Holder
owns our ADSs or warrants, we will generally continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding
years during which the U.S. Holder owns our ADSs or warrants, regardless of whether we continue to meet the tests described above.



Because
PFIC status is based on our income, assets and activities for the entire taxable year, it is not possible to determine whether
we will be characterized as a PFIC for the 2017 taxable year until after the close of the year. Moreover, we must determine our
PFIC status annually based on tests which are factual in nature, and our status in future years will depend on our income, assets
and activities in those years. In addition, our status as a PFIC may depend on how quickly we utilize the cash proceeds from this
offering in our business. There can be no assurance that we will not be considered a PFIC for any taxable year.





141






If
we are a PFIC, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime will
apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any
year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding years
or your holding period for our ADSs or warrants) and (b) any gain realized on the sale or other disposition of the ADSs or warrants.
Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as
if (i) the excess distribution or gain had been realized ratably over your holding period, (ii) the amount deemed realized in
each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income
allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax, at the U.S. Holder’s
regular ordinary income rate for the current year and would not be subject to the interest change discussed below), and (iii)
the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in
those years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term
capital gains discussed above under “Distributions.” Certain elections may be available that would result in an alternative
treatment (such as mark-to-market treatment) of our ADSs or warrants.



If
a U.S. Holder makes the mark-to-market election, then, in lieu of being subject to the tax and interest charge rules discussed
above, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ADSs or warrants
at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of
the adjusted tax basis of the ADSs or warrants over their fair market value at the end of the taxable year (but only to the extent
of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election,
the U.S. Holder’s tax basis in its ADSs or warrants will be adjusted to reflect these income or loss amounts. Any gain recognized
on the sale or other disposition of ADSs or warrants in a year when we are a PFIC will be treated as ordinary income and any loss
will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the
mark-to-market election).



The
mark-to-market election is available only if we are a PFIC and our ADSs or warrants are “regularly traded” on a “qualified
exchange.” Our ADSs and warrants will be treated as “regularly traded” in any calendar year in which more than
a de minimis quantity of our ADSs and warrants are traded on a qualified exchange on at least 15 days during each calendar quarter.
The NASDAQ is a qualified exchange for this purpose. Because a mark-to-market election cannot be made for any lower-tier PFICs
that we may own, a U.S. Holder may continue to be subject to the tax and interest charge rules discussed above with respect to
such holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S.
federal income tax purposes, including stock in any of our subsidiaries that are treated as PFICs. If a U.S. Holder makes a mark-to
market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless
our ADSs or warrants are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.



We
do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified
as a PFIC. U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and if
so, what the consequences of the alternative treatments would be in their particular circumstances.



If
we are determined to be a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions
and gains deemed to be realized by U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.



If
a U.S. Holder owns ADSs or warrants during any year in which we are a PFIC, the U.S. Holder generally will be required to file
an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) with
respect to us, generally with the U.S. Holder’s federal income tax return for that year.



U.S.
Holders should consult their tax advisors regarding whether we are a PFIC and the potential application of the PFIC rules.





142






Medicare
Tax



Certain
U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment
income,” which may include all or a portion of their dividend income and net gains from the disposition of ADSs and warrants.
Each U.S. Holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the
Medicare tax to its income and gains in respect of its investment in our ADSs and warrants.



Certain
Reporting Requirements with Respect to Payments of Offer Price



U.S.
Holders paying more than $100,000 for our ADSs and warrants generally may be required to file IRS Form 926 reporting the payment
of the Offer Price for our ADSs and warrants to us. Substantial penalties may be imposed upon a U.S. Holder that fails to comply.
Each U.S. Holder should consult its own tax advisor as to the possible obligation to file IRS Form 926.



Backup
Withholding Tax and Information Reporting Requirements



U.S.
backup withholding tax and information reporting requirements may apply to certain payments to certain holders of our ADSs and
warrants. Information reporting generally will apply to payments of dividends on our ADSs, and to proceeds from the sale or redemption
of our ADSs and warrants made within the United States, or by a U.S. payer or U.S. middleman, to a holder of our ADSs and warrants,
other than an exempt recipient (including a payee that is not a U.S. person that provides an appropriate certification and certain
other persons). A payer may be required to withhold backup withholding tax from any payments of dividends on our ADSs, or the
proceeds from the sale or redemption of our ADSs and warrants within the United States, or by a U.S. payer or U.S. middleman,
to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise
fails to comply with, or establish an exemption from, such backup withholding tax requirements. Any amounts withheld under the
backup withholding rules will be allowed as a credit against the beneficial owner’s U.S. federal income tax liability, if
any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that the required information
is timely furnished to the IRS.



Foreign
Asset Reporting



Certain
U.S. Holders who are individuals are required to report information relating to an interest in our ADSs and warrants, subject
to certain exceptions (including an exception for shares held in accounts maintained by financial institutions) by filing IRS
Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. Holders are urged to consult
their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition
of our ADSs and warrants.



THE
DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN OUR ADSs
AND WARRANTS 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 required to file reports and other information with the SEC under the Exchange Act and the regulations thereunder applicable
to foreign private issuers.





143






You
may read and copy our Annual Report on Form 20-F, including the related exhibits and schedules, and any document we file with
the SEC without charge at the SEC’s public reference room at 100 F Street, N.E., Room 1580, 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, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The
SEC also maintains an Internet site that contains reports and other information regarding issuers that file electronically with
the SEC. Our filings with the SEC are also available to the public through this web site at http://www.sec.gov. These
SEC filings are also available to the public on (i) the Israel Securities Authority’s Magna website at www.magna.isa.gov.il,
(ii) the Tel Aviv Stock Exchange website at http://www.maya.tase.co.il, and (iii) from commercial document retrieval services.





In addition, since Parent’s ordinary shares
are traded on the TASE, in the past we filed Hebrew language periodic and immediate reports with, and furnished information to,
the TASE and the Israel Securities Authority, or the ISA, as required under Chapter F of the Israel Securities Law, 1968. In
accordance with Section 35XXXIII of the Israel Securities Law, and pursuant to the prior approvals of our securities holders to
change to reporting in accordance with the U.S. securities laws and regulations, we presently report to ISA and the TASE in accordance
with the Securities Regulations (Periodic and Immediate Reports of a Foreign Body Corporate) 5761-2000, promulgated
thereunder (the “Dual-Listed Reporting Requirements”). Pursuant to the Dual-Listed Reporting Requirements, we prepare
our periodic and immediate reports in accordance with U.S. securities laws and reporting requirements. Our major shareholders are
required to make applicable ownership disclosures in accordance with U.S. securities laws and reporting requirements. We generally
initially file or furnish our reports, as applicable, to the SEC. We then submit copies of the SEC filings and submissions to ISA
and TASE, including any filings made by our major shareholders with respect to their holdings in Kitov Parent, in accordance with
the Dual-Listed Reporting Requirements. Such copies can be retrieved electronically through the websites for listed company reports
of ISA (www.magna.isa.gov.il) and TASE (www.maya.tase.co.il).





As
a foreign private issuer, we will be exempt from the rules under the Exchange Act relating to the furnishing and content of proxy
statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. As permitted under the Companies Law, and the Notice Regulations which
were enacted pursuant to such law, and as set forth in Parent’s amended and restated articles of association, Kitov Parent
is not required to physically deliver a notice of a shareholders meeting, a proxy statement or a voting slip. Kitov Parent prepares
notices of general meetings of its shareholders, as well as the accompanying proxy statements, voting slips and voting instruction
forms, (collectively, the “Proxy Materials”) in accordance with applicable laws, rules and regulations and disclosure
requirements in the State of Israel, as such are applicable to a company whose shares are traded on both the TASE and the NASDAQ,
and which reports to the SEC as a foreign private issuer and to ISA and the TASE in accordance with the Dual-Listed Reporting
Requirements. Our Proxy Materials may not necessarily be mailed to our beneficial shareholders in Israel, or to our beneficial
ADS holders in the U.S. We will furnish to the SEC on Form 6-K the forms of our Proxy Materials, and they will be made available
to the public on the SEC’s website at www.sec.gov. We will also submit the Proxy Materials to ISA and TASE and they will
be made available to the public on their respective websites for listed company reports: www.magna.isa.gov.il and www.maya.tase.co.il.
We will also include the Proxy Materials on our corporate website, to the extent required under the Companies Law and the applicable
regulations enacted thereunder governing publication of notices of general meetings of our shareholders and the distribution of
the Proxy Materials. The circulation of by us of any Proxy Materials should not be taken as an admission that we are subject to
the proxy rules under the Exchange Act.





144






In
addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to file with the SEC,
within 120 days after the end of each fiscal year ending December 31, an annual report on Form 20-F containing financial statements
which will be examined and reported on, with an opinion expressed, by an independent registered public accounting firm. In accordance
with the NASDAQ Listing Rules, as a foreign private issuer we are required to submit on a Form 6-K an interim balance sheet and
income statement as of the end of the second quarter of each fiscal year. Furthermore, we have committed to the underwriters of
our initial U.S public offering which was completed in November 2015 that for a period of three (3) years from November 25, 2015,
the Company, at its expense, will announce its financial information for each of the first three fiscal quarters consistent with
the practices of companies which are dual-listed on both the TASE and a domestic U.S. securities exchange and report in accordance
with the Dual-Listed Reporting Requirements; provided that the foregoing shall not apply in the event the Company enters into
a merger transaction in which the Company is the non-surviving entity that would cause our ADSs and warrants to no longer be registered
under the Exchange Act. We will furnish this periodic information with the SEC under cover of Form 6-K. The Representative of
the underwriters of our initial U.S public offering which was completed in November 2015 has previously waived any announcement
by us with respect to the filing of quarterly financial information, and may issue such waivers to us in the future. It is noted
that recent amendments to the Israel Securities Law and Regulations enacted thereunder, dispense with the requirement for the
announcement of financial results for each of the first and third fiscal quarters of a calendar year for certain smaller sized
TASE listed companies which report under TASE only listed reporting requirements. We believe that, were we reporting under the
TASE only listed reporting requirements (and not the Dual Listed Reporting Requirements), we would qualify for such dispensation
based on our company size as set forth in the regulation. In addition the SEC has recently announced that it is seeking comment
for the dispensation of the requirement for the announcement of financial results for each of the first and third fiscal quarters
for certain U.S. domestic issuers. Thus it remains uncertain as to how companies dual-listed on both the TASE and a domestic U.S.
securities exchange, and report in accordance with the Dual-Listed Reporting Requirements, will continue their practices with
respect to the announcements of financial information for each of the first and third fiscal quarters, and it is possible that
we may adopt practices for the announcement (if any) of financial information for each of the first and third fiscal quarters
which are different than what we have provided in the past.



Any
statements in this Annual Report on Form 20-F about any of our agreements, contracts or other documents is not necessarily complete.
If the agreement, contract or document is filed as an exhibit to the Annual Report on Form 20-F the agreement, contract or document
is deemed to modify the description contained in this annual report. We urge you to review the exhibits themselves for a complete
description of the contract or document.



The
Company maintains a corporate website at www.kitovpharma.com. TyrNovo also maintains a website at www.tyrnovo.co.il.
Information contained on, or that can be accessed through, our websites does not constitute a part of this Annual Report on Form
20-F. We have included our website addresses in this Annual Report on Form 20-F solely as inactive textual references. We intend
to post on our websites any materials required to be posted on such website under applicable corporate or securities laws and
regulations, including posting on the Company website any notices of general meetings of Kitov Parent’s shareholders.



|I. | Subsidiary
    Information
|-- | --------------------------



Not
applicable.



|ITEM
    11. | QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------------ | --------------------------------------------------------------



Market
risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial
instruments that may adversely impact our financial position, results of operations or cash flows. Our overall risk management
program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial
performance.



Risk
of Interest Rate Fluctuation and Credit Exposure Risk



We
do not anticipate undertaking any significant long-term borrowings. At present, our credit and interest risk arises from cash
and cash equivalents, deposits with banks as well as accounts receivable. A substantial portion of our liquid instruments is invested
in short-term deposits with Bank Leumi le- Israel Ltd., a major Israeli banking institution.



We
estimate that because the liquid instruments are invested mainly for the short-term and with highly-rated institutions, the credit
and interest risk associated with these balances is immaterial. The primary objective of our investment activities is to preserve
principal while maximizing the income we receive from our investments without significantly increasing risk and loss. Our investments
are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value
of our investments. We manage this exposure by performing ongoing evaluations of our investments.



Equity
Price Risk



We
are not exposed to equity securities price risk because we have never invested in equity securities.





145






Foreign
Currency Exchange Risk



Our
foreign currency exposures give rise to market risk associated with exchange rate movements of the U.S. dollar, our functional
and reporting currency, mainly against the NIS and other currencies. Although the U.S. dollar is our functional currency and reporting
currency, a portion of our expenses are denominated in NIS. Our NIS expenses consist principally of payments to employees or service
providers and short term investments in currencies other than the U.S. dollar. We anticipate that a sizable portion of our expenses
will continue to be denominated in currencies other than the U.S. dollar. If the U.S. dollar fluctuates significantly against
the NIS it may have a negative impact on our results of operations. We manage our foreign exchange risk by aligning the currencies
for holding short term investments with the currencies of expected expenses, based on our expected cash flows.



Portfolio
diversification is performed based on risk level limits that we set. To date, we have not engaged in hedging transactions. In
the future, we may enter 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.



| | (A) | Set forth below is a sensitivity test to possible changes in U.S. dollars/NIS exchange rate as of December 31, 2016:
| | --- | --------------------------------------------------------------------------------------------------------------------





|Sensitive instrument                |  | Income (loss) from change in exchange rate (U.S. dollars in thousands) |     |   | Value (U.S. dollars in thousands) |  |     | Income (loss) from change in exchange rate (U.S. dollars in thousands) | 
|----------------------------------- |  | ---------------------------------------------------------------------- | --- | - | --------------------------------- |  | --- | ---------------------------------------------------------------------- | 
|                                    |  | Down 2%                                                                |     |   | Down 5%                           |  |     |                                                                        | 
|Cash                                |  |                                                                        | (35 | ) |                                   |  | (85 | )                                                                      | 
|Accounts receivable                 |  |                                                                        | (4  | ) |                                   |  | (9  | )                                                                      | 
|Accounts payable                    |  |                                                                        | 8   |   |                                   |  | 20  |                                                                        | 
|Other  payables                     |  |                                                                        | 14  |   |                                   |  | 33  |                                                                        | 
|Post employment benefit liabilities |  |                                                                        | 2   |   |                                   |  | 6   |                                                                        | 
|Total  income (loss)                |  |                                                                        | (15 | ) |                                   |  | (35 | )                                                                      | 





|(B) | As
    of the date of this Annual Report on Form 20-F, our interest rate risk exposure is in respect to bank deposits, which expose
    us to risk due to change in fair value interest rates. As of December 31, 2016 we had interest bearing bank deposits of $8.3
    million, bearing interest in the range of 1.58%-2.7% depending upon the nature of the deposit scheme.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM
    12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|------------ | ------------------------------------------------------



|A. | Debt
    Securities
|-- | -------------------



Not
applicable.



|B. | Warrants
    and Rights
|-- | -----------------------



Not
applicable.



|C. | Other
    Securities
|-- | --------------------



Not
applicable.





146






|D. | American
    Depositary Shares
|-- | ------------------------------



The
Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS
will represent 20 shares (or a right to receive 20 shares) deposited with a local bank in Israel, as custodian for the depositary
in Israel. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The
depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The
Bank of New York Mellon’s principal executive office is located at One Wall Street, New York, New York 10286.



You
may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate
evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name,
or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct
or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS
holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you
must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this
section. You should consult with your broker or financial institution to find out what those procedures are.



Registered
holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.



As
an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs
shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you
will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially
holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit
agreement and the ADSs.



The
following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the
entire deposit agreement and the form of ADR, attached as exhibits to this Annual Report on Form 20-F.



Dividends
and Other Distributions



How
will you receive dividends and other distributions on the shares?



The
depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives
on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions
in proportion to the number of shares your ADSs represent.



Cash.The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can
do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government
approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only
to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the
ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.



Before
making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Item
10. Additional Information – E. Taxation - Taxation of our Shareholders" for more detail. It will distribute only whole
U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time
when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution.



147






Shares.The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The
depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs
representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute
additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed
shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.



Rights
to purchase additional shares.If we offer holders of our securities any rights to subscribe for additional shares or any
other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders
or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its
fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case,
you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory
assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities
to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to
subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict
the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain
ADS holders, and the securities distributed may be subject to restrictions on transfer.



Other
Distributions. The depositary will send to ADS holders anything else we distribute on deposited securities by any means it
thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide
to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what
we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required
to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory 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. U.S. securities laws may restrict the ability of the depositary to distribute
securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.



The
depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders.
We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation
to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means
that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us
to make them available to you.



Deposit,
Withdrawal and Cancellation



How
are ADSs issued?



The
depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian.
Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary
will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person
or persons that made the deposit.



How
can ADS holders withdraw the deposited securities?



You
may surrender your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses
and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and
any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the
custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible.
The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.





148






How
do ADS holders interchange between certificated ADSs and uncertificated ADSs?



You
may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel
that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated
ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting
the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing
those ADSs.



Voting
Rights



How
do you vote?



ADS
holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary
to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’
meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain
how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date
set by the depositary. The depositary will try, as far as practical, subject to the laws of Israel and the provisions of our amended
and restated articles of association or similar documents, to vote or to have its agents vote the shares or other deposited
securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still
send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.



Except
by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your
ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any
event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote
as instructed by the holder of the ADSs or as described in the following sentence.  If we asked the depositary to solicit
your instructions at least 30 days before the meeting date but the depositary does not receive voting instructions from you by
the specified date, it will consider you to have authorized and directed it to give a discretionary proxy to a person designated
by us to vote the number of deposited securities represented by your ADSs.  The depositary will give a discretionary proxy
in those circumstances to vote on all questions at to be voted upon unless we notify the depositary that:



| | ● | 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 voting rights and there may be
nothing you can do if your shares are not voted as you requested.



In
order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited
securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning
the matters to be voted upon at least 30 days in advance of the meeting date.





149






Fees
and Expenses



|Persons
    depositing or withdrawingshares 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 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 shares and the shares had been deposited
    for issuance of ADSs                             | Distribution
    of securities distributed to holders of deposited securities (including rights) that 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 shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw
    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 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                                                                                                                                                                                                                                                                                                      



The
depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs
for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to
investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.
The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing
investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its
fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to
ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until
its fees for those services are paid.



From
time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment
and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from
the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers,
foreign currency or other service providers that are owned by or affiliated with the depositary and that may earn or share fees,
spreads or commissions.



The
depositary may convert foreign currency itself or through any of its affiliates and, in those cases, acts as principal for its
own account and not as an agent, fiduciary or broker on behalf of any other person and earns revenue, including, without limitation,
fees and spreads that it will retain for its own account.  The spread is the difference between the exchange rate assigned
to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives in an offsetting
foreign currency trade. The depositary makes no representation that the exchange rate used or obtained in any currency conversion
under the deposit agreement will be the most favorable rate that could be obtained at the time or as to the method by which that
rate will be determined, subject to its obligations under the deposit agreement.



150






Payment
of Taxes



You
will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented
by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities
represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities
represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited
securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send
to ADS holders any property, remaining after it has paid the taxes.



Amendment
and Termination



How
may the deposit agreement be amended?



We
may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment
adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration
fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become
effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment
becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs
and the deposit agreement as amended.



How
may the deposit agreement be terminated?



The
depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination
of the deposit agreement if



| | ● | 60
    days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted
    its appointment;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | we
    delist our shares from an exchange on which they were listed and do not list the shares on another exchange;
| | - | -------------------------------------------------------------------------------------------------------------------



| | ● | we
    appear to be insolvent or enter insolvency proceedings
| | - | -------------------------------------------------------------



| | ● | all
    or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | ● | there
    are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | ● | there
    has been a replacement of deposited securities.
| | - | ---------------------------------------------------------



If
the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At
any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the
money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability
for interest, for the prorata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell
as soon as practicable after the termination date.



After
the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited
securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if
it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale
proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited
securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute
any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any
notices or perform any other duties under the deposit agreement except as described in this paragraph.



151






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 is 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 exercises 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 believes 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 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 Shares Underlying your ADSs



ADS
holders have the right to cancel their ADSs and withdraw the underlying 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 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 shares or other deposited securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





This right of withdrawal may not be limited
by any other provision of the deposit agreement.







152






Series
A Warrants



The
following summary of certain terms and provisions of the outstanding Series A warrants is not complete and is subject to, and
qualified in its entirety by the provisions of the Warrant Agent Agreement and form of Warrant Certificate, which is filed as
an exhibit to the registration statement filed with the SEC on Form F-1 (Registration No. 333-207117) on November 18, 2015, as
amended by the Letter Amendment to Warrant Agent Agreement which is filed as an exhibit to our Report on Form 6-K submitted
to the SEC on June 29, 2016, as subsequently amended and supplemented. Prospective investors should carefully review the terms
and provisions set forth in the Warrant Agent Agreement and form of Warrant Certificate, as amended. Series A warrants are administered
by the Bank of New York Mellon, as warrant agent.



Exercisability.The
Series A warrants are exercisable immediately upon issuance and at any time up to November 25, 2020. The Series A 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 Series A warrant, the holder will not have the right to exercise the Series A 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 Series A warrants.



Cashless
Exercise. In the event that a registration statement covering ordinary shares underlying the Series A warrants is not
effective, and an exemption from registration is not available for the resale of such ordinary shares underlying the Series A
warrants, the holder may, in its sole discretion, exercise Series A 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 ADSs determined according to the formula set forth in the Warrant Agent 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 exercise price per ADS purchasable upon exercise of the Series A warrants is equal to $3.78 per full ADS (which
may be adjusted as set forth below). In addition to the exercise price per ADS, the $0.05 issuance fee per ADS and other applicable
charges and taxes are due and payable upon exercise.



Adjustment
Provisions. The exercise price and the number of ADSs 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 Series A warrants may be transferred at the option of the holders upon surrender of the Series A warrants
to the warrant agent, together with the appropriate instruments of transfer.



Warrant
Agent and Exchange Listing. The Series A warrants will be issued in registered form under the Warrant Agent Agreement
between us and the warrant agent.



Fundamental
Transaction. If, at any time while the Series A warrants are outstanding, (1) we consolidate or merge with or into another
person, (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 person) is completed pursuant to which holders
of our ordinary shares are permitted to sell, tender or exchange their ordinary shares for other securities, cash or property
and has been accepted by the holders of 50% or more of our outstanding shares of ordinary shares, (4) we effect any reclassification
or recapitalization of our ADSs or 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 whereby such other person acquires more than 50% of our outstanding ordinary shares,
each, a “Fundamental Transaction”, then upon any subsequent exercise of the Series A warrants, the holders thereof
will have the right to receive the same amount and kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder
of the number of ADSs then issuable upon exercise of the Series A warrant, and any additional consideration payable as part of
the Fundamental Transaction.



Rights
as a Shareholder. Except as otherwise provided in the Warrant Agent Agreement or by virtue of such holder’s ownership
of ADSs or ordinary shares, the holder of Series A warrants does not have rights or privileges of a holder of ADSs or ordinary
shares, including any voting rights, until the holder exercises the Series A warrants.





153








PART
II



|ITEM
    13. | DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES
|------------ | ---------------------------------------------------



Not
applicable



|ITEM
    14. | MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|------------ | --------------------------------------------------------------------------------



|A. | Below
    is a summary of the changes to our articles of association effected by the recent adoption of our English language amended
    and restated articles of association on March 2, 2016, replacing our previous Hebrew language articles of association which
    were in effect until March 2, 2016, as well as certain additional amendments to our memorandum of association and our amended
    and restated articles of association which were approved by our shareholders at the 2016 Annual General Meeting of the Shareholders
    held on December 5, 2016.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | An addition to the charitable donations clause to allow us to issue securities to charity.
| | - | ------------------------------------------------------------------------------------------



| | ● | 75%
    of the participating directors at a vote of the board of directors will be required to determine that our center of management
    will be outside of Israel.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
    addition of a clause permitting the board of directors to issue redeemable securities.
| | - | ----------------------------------------------------------------------------------------------



| | ● | The
    addition of the chief executive officer and Company secretary to the authored signatories on share certificates.
| | - | ------------------------------------------------------------------------------------------------------------------------



| | ● | Share
    transfer instruments can be approved by our management instead of needing full board of directors approval.
| | - | ---------------------------------------------------------------------------------------------------------------------



| | ● | The
    addition of a provision stating that the board of directors can decline to approve transfers if not allowed under law, TASE
    rules or otherwise.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
    addition and revision of miscellaneous technical provisions governing submission of proof or ownership and proxies for shareholder
    meetings.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Shareholder
    meetings shall be held in Israel unless our center of management has been changed as set forth in the amended and restated
    articles of association.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Revised
    so that if the chairman of the board of directors is not present for a shareholder meeting then the chief executive officer
    or company secretary, or someone appointed by either of them, shall be chair of a shareholder meeting, before submitting the
    chair selection matter to those present at the shareholders meeting.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Reduction
    in the maximum number of directors from 12 to 9.
| | - | --------------------------------------------------------------



| | ● | A
    majority of directors shall be Israeli residents unless our center of management has been changed as set forth in the amended
    and restated articles of association.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Directors
    shall be appointed for three year terms with one third of the board of director member’s terms expiring every year
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | ● | Changing
    the director appointment provisions in the amended and restated articles of association
    will be subject to a special majority of 75% of the votes cast at a shareholders meeting and which majority comprises at least
    47.9% of Kitov Parent’s voting rights.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





154






| | ● | Removal
    of the provision requiring external directors (this matter will now be subject to the requirements of the Companies Law and
    Regulations).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Establishes
    that the audit committee of the board of directors is delegated with authority to approve the compensation of auditors as
    long as our securities are traded in U.S. markets.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Shorten
    time period for receiving unclaimed dividends from 7 years to 3 years.
| | - | ----------------------------------------------------------------------------------



| | ● | Added
    provision that notices to shareholders may be publicized as specified by law (i.e. not only newspaper ads).
| | - | ---------------------------------------------------------------------------------------------------------------------



| | ● | Transactions
    in which officers have a personal interest but not extraordinary transactions can be approved by chief executive officer and
    chief financial officer (unless they have the personal interest; in which case it will be a director instead), as opposed
    the default provision in the Companies Law which requires full board of directors approval unless the articles of association
    state otherwise.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ● | The increase
    of Kitov Parent’s registered Ordinary Share capital to 5,000,000,000 Ordinary Shares of no par value each.                                                                                                                                                                                                                                                                                                       



| | ● | The
    addition to Kitov Parent’s registered share capital of 1,000,000,000 preferred shares, with no par value in 5 classes
    of 200,000,0000 preferred shares in each class  (the "Preferred Shares"), and the authorization of our
    Board of Directors to fix, by resolution of the Board of Directors, (i) the number of issued Preferred Shares (subject to
    the maximum number of Preferred Shares authorized in such class), (ii) the designation of such class of Preferred Shares,
    and (iii) the conversion, redemption, optional and other special rights, qualifications, limitations or restrictions, if any,
    of the shares of such class of Preferred Shares, without further actions by our shareholders, unless shareholder approval
    is otherwise required for any particular reason by virtue of Israeli law, the rules of any exchange or other market on which
    our securities may then be listed or traded, our Articles of Association then in effect, or any other applicable rules and
    regulations.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
    organizational supervisor for our internal auditor will be our general manager, and the annual or periodic work plan shall
    be presented to our Audit Committee of the Board of Directors for its review and approval.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Our
    Board may issue shares which shall be dormant upon issue.
| | - | -----------------------------------------------------------------



| | ● | The
    provisions in the amended and restated articles of association concerning insurance coverage for directors and officers, waiver
    of liability and indemnification are prospective in nature and will incorporate any future revisions to applicable law governing
    such matters.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Not
    Applicable
|-- | ------------------



|C. | Not
    Applicable
|-- | ------------------



|D. | Not
    Applicable
|-- | ------------------



|E. | Use
    of Proceeds.
|-- | --------------------



Initial
Public Offering



The
effective date of the registration statement (File no. 333-207117) for our initial U.S public offering of our ADSs
and warrants, was November 20, 2015.  The offering with respect to our ADSs and warrants commenced on November
20, 2015 and was closed on November 25, 2015. Rodman & Renshaw, a unit of H.C. Wainwright & Co., and Joseph Gunnar &
Co., LLC were joint bookrunning managers for the offering,  We registered 3,158,900 American Depository Shares (ADSs),
each representing 20 of our ordinary shares, and public warrants to purchase up to 3,158,900 ADSs, and granted the underwriters
a 45-day option to purchase up to an additional 473,835 ADSs and/or warrants to purchase an additional 473,835 ADSs to cover over-allotments,
if any, at the public offering price of $4.12 per ADS and $.01 per public warrant.  The over-allotment was partially
exercised by the underwriters for 220,074 warrants on November 25, 2015.



As of April 2017, we have used approximately $4.5
million of the net proceeds of this offering for research and development activities, approximately $0.6 million to repay the
August Loans, approximately $2.0million for the acquisition of TyrNovo, and approximately $3.5 million for general corporate purposes.
None of the net proceeds of the offering used for research and development activities; repayment of indebtedness; working capital;
and any other purposes for which at least $100,000 has been used, was paid directly or indirectly to any director, officer, general
partner of ours or to their associates, persons owning ten percent or more of any class of our equity securities, or to any of
our affiliates, except for (i) payments in connection with the $100,000 Principal Amount of the August Loans held by Haiku Capital
Ltd., which, together with Mr. Sheer Roichman (who is deemed to beneficially own the shares held by Haiku Capital), became a holder
of more than ten percent of our issued an outstanding share capital as a result of the acquisition of such holdings via participation
in the offering; and (ii) ordinary course payments of ongoing compensation (including bonuses) paid to our directors and executive
officers for their services in accordance with the terms and conditions of their agreements with the Company.



155






|ITEM
    15. | CONTROLS
    AND PROCEDURES
|------------ | ---------------------------



(a)           Disclosure
Controls and Procedures



We
have performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that the
material financial and non-financial information required to be disclosed to the SEC is recorded, processed, summarized and reported
timely. Based on our evaluation, our management, including the chief executive officer and chief financial officer, has concluded
that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended) as of the end of the period covered by this report, were ineffective as described in (b) below.



(b)           Management’s
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.



Our
management, including the chief executive officer and chief financial officer, 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 Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on the results of this evaluation, management concluded
that as at December 31, 2016 our internal control over financial reporting was not effective due to the material weakness in internal
controls described below.



A
deficiency was identified in our internal control over financial reporting related to the operation of the control to review the
accounting for significant non-routine and complex transactions to ensure proper application of IFRS. This control did not operate
effectively due to the lack of timely involvement of the qualified technical resources to perform the required management review.
As a result, during the audit process, an error was detected in the accounting for equity and derivative instruments, which was
corrected prior to filing our audited financial statements for 2016.



We
have undertaken remedial measures by broadening the role of our external financial expert with expertise in IFRS, to allow for
stronger oversight in this area. Under the supervision and with the participation of our senior management, including our principal
executive officer and principal financial officer, we plan to design enhanced processes and controls to address any other issues
that might be identified through our on-going review of our internal control processes and will continue to undertake any needed
remedial measures to make improvements in our internal control.





Notwithstanding
the foregoing, there can be no assurance that our controls and procedures will detect or uncover all failures in our controls
over measurement and disclosure in our financial statements or detect instances of fraud, if any.





156






(c)           Attestation
Report of Registered Public Accounting Firm



This
annual report does not include an attestation report of the Company’s registered public accounting firm due to a transition
period established by the rules of the Securities and Exchange Commission for newly public companies.



(d)           Changes
in Internal Controls over Financial Reporting



There
were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2016 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM
    16. | [RESERVED]
|------------ | ----------



|ITEM
    16A. | AUDIT
    COMMITTEE FINANCIAL EXPERT
|------------- | ------------------------------------



Our
board of directors has determined that Mr. Steinberg and Ms. Stern-Raff are audit committee financial experts as defined by the
SEC rules and have the requisite financial experience as defined by the NASDAQ Listing Rules. Mr. Weber, Mr. Agmon, Mr. Steinberg,
Ms. Stern-Raff and Mr. Tzror qualify as independent directors under the corporate governance standards of the NASDAQ Listing Rules
and the independence requirements of Rule 10A-3 of the Exchange Act.



|ITEM
    16B. | CODE
    OF ETHICS
|------------- | ------------------



Our
Board of Directors adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all our employees, including
without limitation our chief executive officer, chief financial officer and controller. A
copy of the Codemay be viewed on our website at www.kitovpharma.com. It is our intention for the code of ethics to
remain accessible on our website for as long as we remain subject to the requirements of this Item and choose to comply with this
Item by posting the Code on our website. 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. Other
than technical, administrative or other non-substantive amendments, there have been no changes to our code of ethics since our
most recent Annual Report Form 20-F.



|ITEM
    16C. | PRINCIPAL
    ACCOUNTANT FEES AND SERVICES
|------------- | ------------------------------------------



Under
the Companies Law, the board of directors is required to report to the annual general meeting the compensation paid to the auditors.
The following table sets forth the approximate total compensation that was paid by the Company and its subsidiaries to the Company’s
independent auditors, Somekh Chaikin, Certified Public Accountants (Israel), a member of KPMG International, for each of the years
ended December 31:



|                      |  | (in thousands of U.S. dollars) |   
|--------------------- |  | ------------------------------ | --
|                      |  | 2016                           |   
|Audit fees(1)         |  |                                | 51
|Audit-related fees(2) |  |                                | 33
|Tax (3)               |  |                                | 3 
|Total                 |  |                                | 87










| | (1) | “Audit
    fees” include fees for services performed in connection with the Company’s annual audit, certain procedures regarding
    the Company’s interim financial results, consultation concerning financial accounting and reporting standards.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | “Audit-related
    fees” relate to assurance and associated services that are traditionally performed by the independent auditor, including
    fees related to our public offerings and registration statements.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | These
    fees relate to services provided regarding tax compliance and review of tax returns.
| | --- | ----------------------------------------------------------------------------------------------



100%
of the audit related services, tax and other fees described in the table above were approved by the audit committee in accordance
with paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.



157






Audit
committee's pre-approval policies and procedures



Under
the Companies Law and our amended and restatedarticles of association, our shareholders
are authorized to appoint our independent auditors. Under the Companies Law and our amended
and restated articles of association, the shareholders may appoint our independent auditors to hold office for a longer
period of time that will not extend beyond the end of the third annual meeting following that at which the auditor was appointed.
At our 2014 annual general meeting of the shareholders, our shareholders appointed Somekh Chaikin, Certified Public Accountants
(Israel), a member of KPMG International, as the independent public accountants of the Company for such longer period of time
not to extend beyond the 2017 annual general meeting at which time the appointment of an auditor will be presented to the shareholders
once again.



Under
the Companies Law and our amended and restatedarticles of association, the board
of directors is authorized to determine the independent auditor’s remuneration. In addition, the NASDAQ Listing Rules require
that a listed company’s audit committee approve the re-appointment and remuneration of the independent auditor. Our amended
and restated articles of association include a provision which states that for so long as our securities are listed for
trading on an exchange in the United States of America, such authority of the board of directors to set the remuneration of the
auditor for audit activity and/or for additional services to us not being audit-related, will be deemed to have been delegated
by the board of directors to the audit committee of the board of directors.



This
policy, which is designed to assure that such engagements do not impair the independence of our auditors, requires pre-approval
from the audit committee on an annual basis for the various audit and non-audit services that may be performed by our auditors.
Our audit committee is not permitted to approve the engagement of our auditors for any services that would be inconsistent with
maintaining the auditor's independence or that are not permitted by applicable law.



|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
|------------- | ------------------------



Home
Country Practices



As
a foreign private issuer, we are permitted to follow Israeli corporate governance practices instead of NASDAQ Listing Rules, provided
that we disclose which requirements we are not following and the equivalent Israeli requirement. We intend to rely on this “foreign
private issuer exemption” with respect to the following items:



| | ● | Distribution
    of annual and quarterly reports to shareholders. Under Israeli law, as a public company whose shares are traded on the
    TASE, we are not required to distribute annual and quarterly 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 publicly available through the
    website of the Israeli Securities Authority and the TASE. In addition, we make our audited financial statements available
    to our shareholders at our offices.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





158






| | ● | Independent
    Directors.  Israeli law generally does not require that a majority of our board members be independent as required
    by the NASDAQ Listing Rules.  In addition, Israeli law does not require, nor do our independent directors conduct,
    regularly scheduled meetings at which only our independent directors are present. We are required, however, to ensure that
    all members of our audit committee are “independent” under the applicable NASDAQ and SEC criteria for independence.
    On July 13, 2016, our Board of Directors resolved to adopt the corporate governance exceptions set forth in Regulation 5D
    of the Israeli Companies Regulations (Relief for Public Companies with Shares Listed for Trading on a Stock Market Outside
    of Israel), 5760-2000. In accordance with our Board’s resolution, for so long as Kitov Parent does not have a controlling
    shareholder as defined in Section 1 the Companies Law, Kitov Parent intends to comply with the NASDAQ Listing Rules in connection
    with a majority of independent directors on the Board and in connection with the composition of each of the Audit Committee
    in under the Companies Law. As such, our board of directors does not include two directors classified as external directors
    in accordance with the Israeli Companies Law, but such corporate governance exceptions do require that a majority of our board
    members be independent as required by the NASDAQ Listing Rules.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Audit
    Committee. While our board of directors has adopted an audit committee charter, neither applicable Israeli laws, nor our
    amended and restated articles of association, require that we adopt and file an audit committee charter. Consistent with Israeli
    law, the independent auditors are elected at a meeting of shareholders instead of being appointed by the audit committee.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Compensation
    Committee and Compensation of Officers. Under NASDAQ Listing Rules, Kitov Parent must establish a compensation
    committee and adopt a formal written compensation committee charter addressing the scope of the compensation committee's responsibilities,
    including structure, processes and membership requirements, among others. While our board of directors has adopted a compensation
    committee charter, neither applicable Israeli laws, nor our amended and restated articles of association, require that we
    adopt and file a compensation committee charter.  Additionally, we comply with the requirements set forth under the Companies
    Law, pursuant to which transactions with office holders of Kitov Parent regarding their terms of office and employment, and
    transactions with a controlling shareholder in Kitov Parent regarding his or her employment and/or his or her terms of office
    with the Company, may require the approval of the compensation committee, the board of directors and under certain circumstances
    the shareholders, either in accordance with our previously approved compensation policy or, in special circumstances in deviation
    therefrom, taking into account certain considerations set forth in the Companies Law. The requirements for shareholder approval
    of any office holder compensation, and the relevant majority or special majority for such approval, are all as set forth in
    the Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation
    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 NASDAQ Listing Rules.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Shareholder
Approval.  We seek shareholder approval for all corporate actions requiring such approval in accordance with the
requirements of the Companies Law, which are different from the shareholder approval requirements under the NASDAQ Listing Rules,
including NASDAQ Listing Rule 5635. The NASDAQ Listing Rules require that we obtain shareholder approval for certain dilutive
events, such as for the establishment or amendment of certain equity-based compensation plans and arrangements, issuances that
will result in a change of control of a company, certain transactions other than a public offering involving issuances of 20%
or more of the shares or voting power in a company, and certain acquisitions of the stock or assets of another company involving
issuances of 20% or more of the shares or voting power in a company or if any director, officer or holder of 5% or more of the
shares or voting power of the company has a 5% or greater interest in the company or assets to be acquired or consideration to
be paid and the transaction could result in an increase in the outstanding common shares or voting power by 5% or more.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





159






| |  | Under
        the Companies Law, shareholder approval is required for any transaction, including any grant of equity-based compensation,
        to a director or a controlling shareholder, but is not generally required to establish or amend an equity based compensation
        plan. Similarly, shareholder approval is required for a private placement that is deemed a “extraordinary private
        placement” or that involves a director or controlling shareholder. A “extraordinary private placement”
        is a private placement in which a company issues securities representing 20% or more of its voting rights prior to the
        issuance and the consideration received pursuant to such issuance is not comprised, in whole or in part, solely of cash
        or securities registered for trade on an exchange or which is not made pursuant to market conditions, and as a result
        of which the shareholdings of a 5% holder of the shares or voting rights of the company increases or as a result of which
        a person will become a holder of 5% of the shares or voting rights of the company or a controlling shareholder after the
        issuance. We will attempt to seek shareholder approval for our stock option or equity-based compensation plans (and the
        relevant annexes thereto) to the extent required in order to ensure they are tax qualified for any employees in the U.S.
        or who are U.S. citizens. However, even if such approval is not received, then the stock option or equity-based compensation
        plans will continue to be in effect, but we will be unable to grant to our U.S. resident and/or citizen employees options
        that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity-based compensation
        plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S.
        tax laws.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Approval
    of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures
    for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Companies Law, and the regulations
    promulgated thereunder, which require the approval of the audit committee, the compensation committee, the board of directors
    and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent
    body of our Board of Directors as required under the NASDAQ Listing Rules.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Meetings
    of Shareholders: Annual Meetings; Proxy Solicitations; Quorum.  The NASDAQ Listing Rules require that each company
    listing common stock, and their equivalents, hold an annual meeting of shareholders within one year of the end of each fiscal
    year, and that at such meeting, shareholders must be afforded the opportunity to discuss company affairs with management and,
    if required by the Company's governing documents, to elect directors. They further require that each company shall solicit
    proxies and provide proxy statements for all meetings of shareholders and shall provide copies of such proxy solicitation
    to NASDAQ. Under the NASDAQ Listing rules, the quorum required for an ordinary meeting of shareholders consists of 33 1/3%
    of the issued share capital. We will follow our home country practices with respect to the above as follows:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Annual
    Meetings. As permitted under the Companies Law and Regulations enacted pursuant to such law, and as set forth in our amended
    and restated articles of association, we are required to hold an annual meeting each year and provided that it is no later
    than 15 months from the prior annual meeting. At the annual meeting we are required to elect directors (other than external
    directors, if such are required to be elected) and to present the annual financial statements and annual report, as well as
    presenting the fees paid to our auditors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





160






| | ● | Proxy
    Solicitations. As permitted under the Companies Law and Regulations enacted pursuant to such law, and as set forth in
    our amended and restated articles of association, we are not required to physically deliver a notice of a shareholders meeting
    and a proxy statement. We will prepare notices of general meeting of our shareholders, as well as the accompanying proxy statement
    and voting instruction forms, (collectively, the “Proxy Materials”) in accordance with applicable rules, regulations
    and disclosure requirements in the State of Israel, as such are applicable to a Company whose shares are traded on both the
    TASE and the NASDAQ. Our Proxy Materials may not necessarily be mailed to beneficial shareholders in Israel, nor to beneficial
    ADS holders in the U.S. Forms of the Proxy Materials will be furnished to the SEC on Form 6-K, and will be available to the
    public on the SEC’s website at http://www.sec.gov. The proxy materials will also be filed with the Israeli
    Securities Authority and TASE and available on the websites: www.magna.isa.gov.il or www.maya.tase.co.il.
    The Proxy Materials will also be made available on the Company’s corporate website at www.kitovpharma.com,
    as required under the Companies Law and Regulations governing distribution of the Proxy Materials.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Quorum.
    As permitted under the Companies Law, pursuant to our amended and restated articles of association, the quorum required for
    an ordinary meeting of our shareholders consists of at least two shareholders present in person or by proxy who hold or represent
    at least 25% of the voting rights of our shares (and in an adjourned meeting, with some exceptions, any number of shareholders),
    instead of 33 1/3% of the issued share capital required under the NASDAQ Listing Rules.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Nominations
    Committee and Nominations of our Directors.  Our directors are not selected, nor recommended for
    board of director selection, by independent directors constituting a majority of the board’s independent directors or
    by a nominations committee comprised solely of independent directors as required by the NASDAQ Listing Rules. With the exception
    of external directors (if any are required to be elected) and any directors elected by our Board of Directors due to vacancy,
    our directors are elected by a general or special meeting of our shareholders. The nominations for directors, which are
    presented to our shareholders, are generally made by our directors, but nominations may be made by one or more of our shareholders
    as provided in our amended and restated articles of association, under the Companies Law or in an agreement between us and
    our shareholders. GHP has entered into a Shareholder’s Undertaking with Kitov Parent pursuant to which it has agreed
    to vote its ordinary shares, subject to certain exceptions relating to significant corporate transactions, in accordance with
    the recommendation of Kitov Parent’s board of directors and in favor of persons nominated and recommended to serve as
    directors by the board, and has granted Kitov Parent an proxy to ensure its compliance with such voting undertakings. Other
    than such Shareholder’s Undertaking, currently there is no other agreement between us and any shareholder regarding
    the nomination or appointment of directors. In accordance with our amended and restated articles of association, under the
    Companies Law, any one or more shareholders holding, in the aggregate such portions of our outstanding voting power, as set
    forth in our amended and restated articles of association may nominate one or more persons for election as directors at a
    general meeting by delivering a written notice of such shareholder’s intent to make such nomination or nominations to
    our registered office. Each such notice must set forth all of the details and information as required to be provided by our
    amended and restated articles of association.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Nominations
    Committee Charter or Board Resolution.  Under NASDAQ Listing Rules, U.S. domestic listed companies, must adopt
    a formal written charter or board resolution, as applicable, addressing the nominations process and such related matters as
    may be required under the federal securities laws. We do not have such a formal written charter or board resolution.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Otherwise,
we intend to comply with the rules generally applicable to U.S. domestic companies listed on NASDAQ. We may in the future decide
to use the foreign private issuer exemption with respect to some or all of the other NASDAQ Listing Rules related to corporate
governance. We also intend to comply with Israeli corporate governance requirements set forth in the Companies Law and Regulations
enacted pursuant to such law which are applicable to public companies.



Disclosure
of Compensation of Executive Officers



For
so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic
companies, including the requirement applicable to emerging growth companies to disclose the compensation of our chief executive
officer and other two most highly compensated executive officers on an individual, rather than an aggregate, basis. Nevertheless,
a recent amendment to the Israeli proxy regulations governing Israeli public companies which were promulgated under the Israeli
Companies Law requires us to disclose in the notice and proxy statement for our annual general meeting of our shareholders (or
to include a reference therein to other previously furnished public disclosure) the annual compensation of our five most highly
compensated office holders on an individual basis, rather than on an aggregate basis, as was previously permitted for Israeli
public companies listed overseas. This disclosure may not be as extensive as that required of a U.S. domestic issuer.



|ITEM
    16H. | MINE
    SAFETY DISCLOSURE
|------------- | --------------------------



Not
applicable





161






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 consolidated financial statements as of December 31, 2016 and 2015 and for the three-year period ended December 31, 2016 of
Kitov Pharmaceuticals Holdings Ltd., and the report thereon dated March 27, 2017 of Somekh Chaikin, independent registered public
accounting firm, a Member Firm of KPMG International, beginning on page F-1.



|ITEM
    19. | EXHIBITS
|------------ | --------



The
exhibits filed with or incorporated into this Annual Report on Form 20-Fare listed
in the index of exhibits below:



|Exhibit
    Number |  | Exhibit Description                                                                                                                                                                                                                                                                                                                                                          
|------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1                |  | Memorandum
of Association of the Registrant (included as Exhibit 99.2 to our Form 6-k furnished to the Securities and Exchange Commission
on December 6, 2016, and incorporated herein by reference).                                                                                                                                                                        
|1.2                |  | Amended
and Restated Articles of Association of the Registrant (included as Exhibit 99.2 to our Form 6-k furnished to the Securities and
Exchange Commission on December 6, 2016, and incorporated herein by reference).                                                                                                                                                     
|1.3                |  | Certificate
of Company Name Change (unofficial English translations from Hebrew) (included as part of Exhibit 3.1 to our Registration Statement
on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).                                                                                               
|2.1                |  | Form
of Deposit Agreement among the Registrant, the Bank of New York Mellon, as Depositary, and all Owners and Holders from time to
time of American Depositary Shares issued hereunder (included as Exhibit 4.1 to our Registration Statement on Form F-1 as filed
with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).
|2.2                |  | Form
of Warrant Agent Agreement (included as Exhibit 4.2 to our Registration Statement on Form F-1/A as filed with the Securities and
Exchange Commission on November 18, 2015, and incorporated herein by reference).                                                                                                                                                       
|2.3                |  | Form
of American Depositary Receipt (included in Exhibit 2.1).                                                                                                                                                                                                                                                                                                               
|2.4                |  | Form
of Underwriters' Warrant, (included as Exhibit 4.4 to our Registration Statement on Form F-1/A as filed with the Securities and
Exchange Commission on November 18, 2015, and incorporated herein by reference).                                                                                                                                                        
|2.5                |  | Form
of Placement Agent Warrant (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form
F-1 as filed with the Securities and Exchange Commission on June 27, 2016).                                                                                                                                                                     
|2.6                |  | Form
of Letter Amendment to Warrant Agent Agreement with respect to Series A warrants (incorporated by reference to Exhibit 4.1 to
the Registrant’s Form 6-K furnished to the Securities and Exchange Commission on June 29, 2016)                                                                                                                                           





162










|2.7   |  | Form of Pre-Funded Series B Warrant Agreement (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on June 27, 2016).                                                                                                                                                                                                                 
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.8   |  | Stock
    Purchase Agreement, dated January 12, 2017, by and between the Registrant and Goldman Hirsh Partners Ltd.                                                                                                                                                                                                                                                                                                                    
|2.9   |  | Shareholder’s Undertaking by Goldman Hirsh Partners Ltd. dated January 13, 2017.                                                                                                                                                                                                                                                                                                                                                       
|2.10  |  | Flow of Funds Agreement, dated April 9, 2017, by and between the Registrant and Goldman Hirsh Partners Ltd.                                                                                                                                                                                                                                                                                                                            
|4.1*  |  | Development
Services Agreement, dated as of April 1, 2014, by and between Kitov Pharmaceuticals Ltd. and Dexcel Ltd. (included as Exhibit
10.1 to our Registration Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015, and
incorporated herein by reference).                                                                                                                            
|4.2   |  | Master
Research Services Agreement, dated February 4, 2014, between Kitov Pharmaceuticals Ltd.t and Java Clinical Research Limited (included
as Exhibit 10.2 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015,
and incorporated herein by reference).                                                                                                                 
|4.3   |  | Change
Order Forms under Master Research Services Agreement between Kitov Pharmaceuticals Ltd. and Java Clinical Research Limited dated
March 26, 2014, September 22, 2014, and April 2, 2015 (included as Exhibit 10.3 to our Registration Statement on Form F-1 as filed
with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).                                                   
|4.4   |  | Work
Order No. 2 under Master Research Services Agreement between Kitov Pharmaceuticals Ltd. and Java Clinical Research Limited dated
September 7, 2016 (incorporated by reference to Exhibit 10.4 to the Registrant’s Post-Effective Amendment No. 2 to Registration
Statement on Form F-1 on Form F-3 as filed with the Securities and Exchange Commission on December 12, 2016).                                                    
|4.5   |  | Share
Transfer Agreement, dated as of April 2, 2013, Kitov Pharmaceuticals Holdings Ltd. (then known as Mainron Line Logisitics Ltd.),
Kitov Pharmaceuticals Ltd., the shareholders of Kitov Pharmaceuticals, Sheer Roichman and Haiku Capital Ltd. (included as Exhibit
10.4 to our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015, and incorporated
herein by reference).
|4.6   |  | Form
of Letter of Exemption adopted on July 2013 (unofficial English translation from Hebrew) (included as Exhibit 10.5 to
our Registration Statement on Form F-1  filed with the Securities and Exchange Commission on September 24, 2015, and
incorporated herein by reference).                                                                                                                                                     
|4.7   |  | Form
of Letter of Indemnity adopted on July 2013 (unofficial English translation from Hebrew) (included as Exhibit 10.6 to our Registration
Statement on Form F-1 as filed with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).                                                                                                                                                   
|4.8   |  | 2013
Stock Option Plan, as amended (unofficial English translation from Hebrew (included as Exhibit 10.7 to our Registration Statement
on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015, and incorporated herein by reference).                                                                                                                                                                     
|4.9   |  | Kitov
Pharmaceuticals Holdings Ltd. 2016 Equity-Based Incentive Plan (included as Exhibit 99.1 to our Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on May 19, 2016, and incorporated herein by reference)                                                                                                                                                                                      
|4.10  |  | Loan
Agreement, dated August 12, 2015 between Kitov Pharmaceuticals Holdings Ltd. and certain lenders (included as Exhibit 10.8 to
our Registration Statement on Form F-1 filed with the Securities and Exchange Commission on September 24, 2015, and incorporated
herein by reference).                                                                                                                                              
|4.11  |  | Kitov Pharmaceuticals Holdings Ltd. 2014 Office Holders' Compensation Policy (unofficial translation to English from Hebrew original) (included as Exhibit 4.9 to our Annual Report for 2015 on Form 20-F filed with the Securities and Exchange Commission on March 18, 2016, and incorporated herein by reference).                                                                                                                  
|4.12  |  | Form
of Underwriting Agreement (included as Exhibit 1.1 to our Registration Statement on Form F-1/A filed with the Securities and Exchange
Commission on November 18, 2015, and incorporated herein by reference).                                                                                                                                                                                                                     
|4.13  |  | Form
of Share Purchase Agreement between Kitov Pharmaceuticals Holdings Ltd. and the purchasers (incorporated by reference to Exhibit
1.1 to the Registrant’s Form 6-K furnished to the Securities and Exchange Commission on June 29, 2016)                                                                                                                                                                                           
|4.14† |  | License
Agreement, dated as of August 15, 2013, by and between Yissum Research Development Company of The Hebrew University of Jerusalem,
Ltd. and Tyrnovo Ltd.                                                                                                                                                                                                                                                                        
|4.15† |  | First
Amendment to License Agreement, dated as of April 8, 2014, by and between Yissum Research Development Company of The Hebrew University
of Jerusalem, Ltd. and Tyrnovo Ltd.                                                                                                                                                                                                                                                       
|4.16† |  | Second
Amendment to License Agreement, dated as of March 16, 2017, by and between Yissum Research Development Company of The Hebrew University
of Jerusalem, Ltd. and Tyrnovo Ltd.                                                                                                                                                                                                                                                     
|4.17  |  | Binding
Term Sheet by and amongst Kitov Pharmaceuticals Holdings Ltd., TyrNovo Ltd. and Taoz – Company for Management and Holdings
of Companies Ltd. approved by the Economic Division of the Tel Aviv District Court on February 9, 2017                                                                                                                                                                                              
|4.18  |  | Amendment
to the Binding Term Sheet by and amongst Kitov Pharmaceuticals Holdings Ltd., TyrNovo Ltd. and Taoz – Company for Management
and Holdings of Companies Ltd. approved by the Economic Division of the Tel Aviv District Court on February 9, 2017
(unofficial English translations from Hebrew)                                                                                                                               
|4.19  |  | TyrNovo
Ltd. Shareholders Agreement by and between Kitov Pharmaceuticals Holdings Ltd. and Taoz – Company for Management and Holdings
of Companies Ltd. approved by the Economic Division of the Tel Aviv District Court on February 9, 2017                                                                                                                                                                                           
|8.1   |  | List
of subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                                                
|12.1  |  | Certification
    by Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                
|12.2  |  | Certification
by Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                    
|13.1  |  | Certification
by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                    
|13.2  |  | Certification
by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                    



*
Confidential treatment granted with respect to portions of this Exhibit.

†
Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential
treatment request.



163








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 Form 20-F on its behalf.



| | KITOV
    PHARMACEUTICALS HOLDINGS LTD.
| | ---------------------------------------
| |                                        
| | By:                                    
| |                                        
| |                                        
| |                                        
| | By:                                    
| |                                        
| |                                        



May
1, 2017





164
























Kitov
Pharmaceuticals Holdings Ltd.



Consolidated
Financial Statements

As
of December 31, 2016





































Contents



|                                                                     | Page          
|-------------------------------------------------------------------- | --------------
|                                                                     |               
|Auditors’ Report                                                     | F-2           
|                                                                     |               
|Consolidated
    Financial Statements as of December 31, 2016        |               
|                                                                     |               
|Consolidated Statements of Financial Position                        | F-3           
|                                                                     |               
|Consolidated Statements of Operations and other Comprehensive Income | F-4           
|                                                                     |               
|Consolidated Statements of Changes in Equity                         | F-5
    - F-6 
|                                                                     |               
|Consolidated Statements of Cash Flows                                | F-7           
|                                                                     |               
|Notes to the Consolidated Financial Statements                       | F-8
    - F-24





F-1







Report
of Independent Registered Public Accounting Firm



The
Board of Directors and Shareholders

Kitov
Pharmaceuticals Holdings Ltd.



We
have audited the accompanying consolidated statements of financial position of Kitov Pharmaceuticals Holdings Ltd and its
subsidiary (hereinafter – “the Company”)  as of December 31, 2016 and 2015, and the related consolidated
statements of operations, changes in equity (deficit) and cash flows for each of the years in the three-year period ended December
31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated 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.  Our audit 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2016, in conformity with International Financial Reporting Standards as
issued by the International Accounting Standards Board.



We
draw attention to Note 11F to the financial statements. There is an ongoing activity conducted by the Israel Securities Authority
to investigate allegations that the Company did not disclose certain information to the public. In addition, numerous lawsuits
and motions have been filed against the Company and certain of its office holders. The ultimate outcome of these matters cannot
presently be determined, and no provision for any liability that may result has been made in the financial statements. Our opinion
is not modified in respect of this matter.



/s/Somekh Chaikin



Somekh
Chaikin

Certified
Public Accountants (Isr.)

Member
firm of KPMG International

Tel-Aviv,
Israel



March
27, 2017





F-2







Kitov
Pharmaceuticals Holdings Ltd.



Consolidated
Statements of Financial Position






|                                                       |  |      |      |  | December 31   |  |         | December 31   | 
|------------------------------------------------------ |  | ---- | ---- |  | ------------- |  | ------- | ------------- | 
|                                                       |  |      |      |  | 2016          |  |         | 2015          | 
|                                                       |  | Note |      |  | USD thousands |  |         | USD thousands | 
|Assets                                                 |  |      |      |  |               |  |         |               | 
|Cash and cash equivalents                              |  |      | 4,18 |  |               |  | 6,758   |               | 
|Short term deposits                                    |  |      | 18   |  |               |  | 7,899   |               | 
|Other receivables                                      |  |      | 5    |  |               |  | 241     |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Total current assets                                   |  |      |      |  |               |  | 14,898  |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Fixed assets, net                                      |  |      |      |  |               |  | 16      |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Total assets                                           |  |      |      |  |               |  | 14,914  |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Liabilities                                            |  |      |      |  |               |  |         |               | 
|Accounts payable                                       |  |      |      |  |               |  | 515     |               | 
|Other payables                                         |  |      | 7    |  |               |  | 758     |               | 
|Derivative instruments                                 |  |      | 8    |  |               |  | -       |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Total current liabilities                              |  |      |      |  |               |  | 1,273   |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Non-current liabilities                                |  |      |      |  |               |  |         |               | 
|Post employment benefit liabilities                    |  |      | 17   |  |               |  | 256     |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Equity                                                 |  |      |      |  |               |  |         |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Share capital, no par value                            |  |      |      |  |               |  | -       |               | 
|Share premium                                          |  |      | 8    |  |               |  | 30,826  |               | 
|Receipts on account of warrants                        |  |      | 8    |  |               |  | 7,415   |               | 
|Capital reserve for share-based payments               |  |      | 9    |  |               |  | 583     |               | 
|Capital reserve from transactions with related parties |  |      |      |  |               |  | 761     |               | 
|Accumulated loss                                       |  |      |      |  |               |  | (26,200 | )             | 
|Total equity                                           |  |      |      |  |               |  | 13,385  |               | 
|                                                       |  |      |      |  |               |  |         |               | 
|Total liabilities and equity                           |  |      |      |  |               |  | 14,914  |               | 



The
accompanying notes are an integral part of these consolidated financial statements.





F-3







Kitov
Pharmaceuticals Holdings Ltd.



Consolidated Statements of Operations and Other Comprehensive
Income






|                                                                             |  |      |    |  | 2016          |  |             | 2015          |  |  | 2014          |  
|---------------------------------------------------------------------------- |  | ---- | -- |  | ------------- |  | ----------- | ------------- |  |  | ------------- | -
|                                                                             |  | Note |    |  | USD thousands |  |             | USD thousands |  |  | USD thousands |  
|Research and development expenses                                            |  |      | 12 |  |               |  | 4,180       |               |  |  | 2,560         |  
|General and administrative expenses                                          |  |      | 13 |  |               |  | 3,003       |               |  |  | 1,509         |  
|Other expenses                                                               |  |      | 14 |  |               |  | -           |               |  |  | -             |  
|Operating Loss                                                               |  |      |    |  |               |  | 7,183       |               |  |  | 4,069         |  
|                                                                             |  |      |    |  |               |  |             |               |  |  |               |  
|                                                                             |  |      |    |  |               |  |             |               |  |  |               |  
|Net change in fair value of derivatives                                      |  |      | 15 |  |               |  | 5,019       |               |  |  | (94           | )
|Finance expense                                                              |  |      | 15 |  |               |  | 61          |               |  |  | 227           |  
|Finance income                                                               |  |      | 15 |  |               |  | (138        | )             |  |  | -             |  
|Finance expenses, net                                                        |  |      |    |  |               |  | 4,942       |               |  |  | 133           |  
|                                                                             |  |      |    |  |               |  |             |               |  |  |               |  
|Loss for the year                                                            |  |      |    |  |               |  | 12,125      |               |  |  | 4,202         |  
|Other
comprehensive loss Items that will not be classified to profit or loss |  |      |    |  |               |  |             |               |  |  |               |  
|Remeasurement of defined benefit liability                                   |  |      |    |  |               |  | 21          |               |  |  | -             |  
|                                                                             |  |      |    |  |               |  |             |               |  |  |               |  
|Total comprehensive loss for the year                                        |  |      |    |  |               |  | 12,146      |               |  |  | 4,202         |  
|Loss per share data                                                          |  |      |    |  |               |  |             |               |  |  |               |  
|Basic and diluted loss per share – USD                                       |  |      |    |  |               |  | 0.11        |               |  |  | 0.22          |  
|Number of shares used in calculating basic and diluted loss per share        |  |      |    |  |               |  | 115,114,946 |               |  |  | 19,250,340    |  





The
accompanying notes are an integral part of these consolidated financial statements





F-4







Kitov
Pharmaceuticals Holdings Ltd.



Consolidated Statements of Changes in Equity






|                                                                                   |  | Share
    Capital |   |  | Share
    premium |  |        | Receipts
                                         on account of warrants |  |  | Capital
    reserve for share-based payments |   |  | Capital
    reserve from transactions with related parties |      |   | Accumulated
    loss |  |     | Total | 
|---------------------------------------------------------------------------------- |  | ----------------- | - |  | ----------------- |  | ------ | ------------------------------------------------------------------------ |  |  | -------------------------------------------- | - |  | ---------------------------------------------------------- | ---- | - | -------------------- |  | --- | ----- | 
|                                                                                   |  |                   |  
|For the year ended December 31, 2016:                                              |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |      |   |                      | 
|Balance as of January 1, 2016                                                      |  |                   | - |  |                   |  | 22,159 |                                                                          |  |  | 27                                           |   |  |                                                            | 536  |   |                      |  | 761 |       | 
|Comprehensive loss for the year:                                                   |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |      |   |                      |  |     |       | 
|Loss for the year                                                                  |  |                   | - |  |                   |  | -      |                                                                          |  |  | -                                            |   |  |                                                            | -    |   |                      |  | -   |       | 
|Other comprehensive loss                                                           |  |                   | - |  |                   |  | -      |                                                                          |  |  | -                                            |   |  |                                                            | -    |   |                      |  |     |       | 
|Total comprehensive loss for the year                                              |  |                   | - |  |                   |  | -      |                                                                          |  |  | -                                            |   |  |                                                            | -    |   |                      |  | -   |       | 
|Transactions with owners of the company:                                           |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |      |   |                      |  |     |       | 
|Issuance of American Depository Shares (ADSs) on the NASDAQ, net of issuance costs |  |                   | - |  |                   |  | 5,222  |                                                                          |  |  | -                                            |   |  |                                                            | -    |   |                      |  | -   |       | 
|Issuance of warrants, net of issuance costs                                        |  |                   | - |  |                   |  | -      |                                                                          |  |  | 2,517                                        |   |  |                                                            | -    |   |                      |  | -   |       | 
|Share issuance due to a strategic cooperation agreement (see note 11)              |  |                   | - |  |                   |  | 500    |                                                                          |  |  | -                                            |   |  |                                                            | (250 | ) |                      |  | -   |       | 
|Share-based payments                                                               |  |                   | - |  |                   |  | 103    |                                                                          |  |  | -                                            |   |  |                                                            | 297  |   |                      |  | -   |       | 
|Transfer of  derivative instrument from liability to equity                        |  |                   | - |  |                   |  | -      |                                                                          |  |  | 7,388                                        |   |  |                                                            | -    |   |                      |  | -   |       | 
|Exercise of warrants (series A)                                                    |  |                   |   |  |                   |  | 302    |                                                                          |  |  |                                              |   |  |                                                            |      |   |                      |  |     |       | 
|Exercise of warrants (series B)                                                    |  |                   | - |  |                   |  | 2,540  |                                                                          |  |  | (2,517                                       | ) |  |                                                            | -    |   |                      |  | -   |       | 
|Total transactions with owners of the company                                      |  |                   | - |  |                   |  | 8,667  |                                                                          |  |  | 7,388                                        |   |  |                                                            | 47   |   |                      |  | -   |       | 
|                                                                                   |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |      |   |                      |  |     |       | 
|Balance as of December 31, 2016                                                    |  |                   | - |  |                   |  | 30,826 |                                                                          |  |  | 7,415                                        |   |  |                                                            | 583  |   |                      |  | 761 |       | 



|                                                                                       |  | Share
    Capital |   |  | Share
    premium |  |        | Receipts
                                         on account of warrants |  |  | Capital
    reserve for share-based payments |   |  | Capital
    reserve from transactions with related parties |     |   | Accumulated
    loss |  |     | Total | 
|-------------------------------------------------------------------------------------- |  | ----------------- | - |  | ----------------- |  | ------ | ------------------------------------------------------------------------ |  |  | -------------------------------------------- | - |  | ---------------------------------------------------------- | --- | - | -------------------- |  | --- | ----- | 
|                                                                                       |  |                   |  
|For
    the year ended December 31, 2015:                                              |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |     |   |                      |  |    
|Balance
    as of January 1, 2015                                                      |  |                   | - |  |                   |  | 9,104  |                                                                          |  |  | 200                                          |   |  |                                                            | 560 |   |                      |  | 761 |       | 
|Loss
    for the year                                                                  |  |                   | - |  |                   |  | -      |                                                                          |  |  | -                                            |   |  |                                                            | -   |   |                      |  | -   |       | 
|Issuance
    of shares, net of issuance costs                                          |  |                   | - |  |                   |  | 1,821  |                                                                          |  |  | -                                            |   |  |                                                            | -   |   |                      |  | -   |       | 
|Exercise
    and expiration of warrants (series 1)                                     |  |                   | - |  |                   |  | 201    |                                                                          |  |  | (200                                         | ) |  |                                                            | -   |   |                      |  | -   |       | 
|Share
    issuance due to a strategic cooperation agreement (see note 11)              |  |                   | - |  |                   |  | 500    |                                                                          |  |  | -                                            |   |  |                                                            | (83 | ) |                      |  | -   |       | 
|Share-based
    payments                                                               |  |                   | - |  |                   |  | -      |                                                                          |  |  | -                                            |   |  |                                                            | 59  |   |                      |  | -   |       | 
|Exercise
    of warrants (series 2)                                                    |  |                   | - |  |                   |  | 2      |                                                                          |  |  | -                                            |   |  |                                                            | -   |   |                      |  | -   |       | 
|Issuance
    of American Depository Shares (ADSs) on the NASDAQ, net of issuance costs |  |                   | - |  |                   |  | 10,531 |                                                                          |  |  | -                                            |   |  |                                                            | -   |   |                      |  | -   |       | 
|Issuance
    of warrants, net of issuance costs                                        |  |                   | - |  |                   |  | -      |                                                                          |  |  | 27                                           |   |  |                                                            | -   |   |                      |  | -   |       | 
|                                                                                       |  |                   |   |  |                   |  |        |                                                                          |  |  |                                              |   |  |                                                            |     |   |                      |  |     |       | 
|Balance
    as of December 31, 2015                                                    |  |                   | - |  |                   |  | 22,159 |                                                                          |  |  | 27                                           |   |  |                                                            | 536 |   |                      |  | 761 |       | 



The
accompanying notes are an integral part of these consolidated financial statements.



F-5







Kitov
Pharmaceuticals Holdings Ltd.



Consolidated Statements of Changes in Equity








|                                                                      |  | Share Capital |   |  | Share premium |  |       | Receipts on account
of warrants |  |  | Capital reserve for share-based payments |  |  | Capital reserve from transactions with related parties |     |   | Accumulated loss |  |      | Total | 
|--------------------------------------------------------------------- |  | ------------- | - |  | ------------- |  | ----- | ------------------------------- |  |  | ---------------------------------------- |  |  | ------------------------------------------------------ | --- | - | ---------------- |  | ---- | ----- | 
|                                                                      |  |               |  
|For the year ended December 31, 2014:                                 |  |               |   |  |               |  |       |                                 |  |  |                                          |  |  |                                                        |     |   |                  |  |     
|                                                                      |  |               |   |  |               |  |       |                                 |  |  |                                          |  |  |                                                        |     |   |                  |  |      |       | 
|Balance as of January 1, 2014                                         |  |               | - |  |               |  | 2,654 |                                 |  |  | -                                        |  |  |                                                        | 141 |   |                  |  | 859  |       | 
|Loss for the year                                                     |  |               | - |  |               |  | -     |                                 |  |  | -                                        |  |  |                                                        | -   |   |                  |  | -    |       | 
|Issuance of shares, net of issuance costs                             |  |               | - |  |               |  | 6,200 |                                 |  |  |                                          |  |  |                                                        | 57  |   |                  |  | -    |       | 
|Issuance of warrants in a rights offering                             |  |               | - |  |               |  | (200  | )                               |  |  | 200                                      |  |  |                                                        | -   |   |                  |  | -    |       | 
|Share issuance due to a strategic cooperation agreement (see note 11) |  |               | - |  |               |  | 327   |                                 |  |  | -                                        |  |  |                                                        | 333 |   |                  |  | -    |       | 
|Share-based payments                                                  |  |               | - |  |               |  | -     |                                 |  |  | -                                        |  |  |                                                        | 88  |   |                  |  | -    |       | 
|Options exercised                                                     |  |               | - |  |               |  | 123   |                                 |  |  | -                                        |  |  |                                                        | (59 | ) |                  |  | -    |       | 
|Capital reserve from transactions with related parties                |  |               | - |  |               |  | -     |                                 |  |  | -                                        |  |  |                                                        | -   |   |                  |  | 43   |       | 
|Return of funds to a related party                                    |  |               | - |  |               |  | -     |                                 |  |  | -                                        |  |  |                                                        | -   |   |                  |  | (141 | )     | 
|                                                                      |  |               |   |  |               |  |       |                                 |  |  |                                          |  |  |                                                        |     |   |                  |  |      |       | 
|Balance as of December 31, 2014                                       |  |               | - |  |               |  | 9,104 |                                 |  |  | 200                                      |  |  |                                                        | 560 |   |                  |  | 761  |       | 





The
accompanying notes are an integral part of these consolidated financial statements.





F-6







Kitov
Pharmaceuticals Holdings Ltd.



Consolidated Statements of Cash Flows for the year ended December
31,






|                                                                      |  | 2016          |         |   | 2015 |  |        | 2014 | 
|--------------------------------------------------------------------- |  | ------------- | ------- | - | ---- |  | ------ | ---- | 
|                                                                      |  | USD thousands |        
|Cash flows from operating activities:                                 |  |               |         |   |      |  |        |      | 
|Loss for the year                                                     |  |               | (12,125 | ) |      |  | (4,202 | )    | 
|                                                                      |  |               |         |   |      |  |        |      | 
|Adjustments:                                                          |  |               |         |   |      |  |        |      | 
|Depreciation                                                          |  |               | 2       |   |      |  | 1      |      | 
|Finance expense, net                                                  |  |               | 4,942   |   |      |  | 133    |      | 
|Share-based payments                                                  |  |               | 400     |   |      |  | 59     |      | 
|Expenses in regard to a strategic cooperation agreement (see note 11) |  |               | 250     |   |      |  | 417    |      | 
|Non-remunerable services provided by related parties                  |  |               | -       |   |      |  | -      |      | 
|                                                                      |  |               |         |   |      |  |        |      | 
|                                                                      |  |               | (6,531  | ) |      |  | (3,592 | )    | 
|                                                                      |  |               |         |   |      |  |        |      | 
|Changes in assets and liabilities:                                    |  |               |         |   |      |  |        |      | 
|Changes in other receivables                                          |  |               | -       |   |      |  | 197    |      | 
|Changes in accounts payable                                           |  |               | (138    | ) |      |  | (152   | )    | 
|Changes in other payables                                             |  |               | 357     |   |      |  | 54     |      | 
|Changes in post employment benefit liabilities                        |  |               | 50      |   |      |  | 185    |      | 
|                                                                      |  |               | 269     |   |      |  | 284    |      | 
|Net cash used in operating activities                                 |  |               | (6,262  | ) |      |  | (3,308 | )    | 
|                                                                      |  |               |         |   |      |  |        |      | 
|Cash flows from investing activities:                                 |  |               |         |   |      |  |        |      | 
|Increase in short term deposits                                       |  |               | (7,899  | ) |      |  | -      |      | 
|Acquisition of fixed assets                                           |  |               | (10     | ) |      |  | (9     | )    | 
|Net cash used in investing activities                                 |  |               | (7,909  | ) |      |  | (9     | )    | 
|                                                                      |  |               |         |   |      |  |        |      | 
|Cash flows from financing activities:                                 |  |               |         |   |      |  |        |      | 
|Repayment of loans from related parties                               |  |               | -       |   |      |  | (294   | )    | 
|Loans received from third parties                                     |  |               | -       |   |      |  | -      |      | 
|Repayment of loans from third parties                                 |  |               | -       |   |      |  | -      |      | 
|Proceeds from issuance of shares and ADSs                             |  |               | 6,287   |   |      |  | 14,942 |      | 
|Share and ADS  issuance expenses paid                                 |  |               | (1,065  | ) |      |  | (2,059 | )    | 
|Proceeds from issuance of warrants                                    |  |               | 5, 713  |   |      |  | 190    |      | 
|Warrants issuance expenses paid                                       |  |               | (968    | ) |      |  | (10    | )    | 
|Receipts from warrant exercise                                        |  |               | 325     |   |      |  | 2      |      | 
|Interest received                                                     |  |               | 138     |   |      |  | -      |      | 
|Interest paid                                                         |  |               | (6      | ) |      |  | (145   | )    | 
|Net cash provided by financing activities:                            |  |               | 10,424  |   |      |  | 12,632 |      | 
|                                                                      |  |               |         |   |      |  |        |      | 
|Net increase (decrease) in cash                                       |  |               | (3,747  | ) |      |  | 9,315  |      | 
|Cash at the beginning of the year                                     |  |               | 10,558  |   |      |  | 1,313  |      | 
|Effect of translation adjustments on cash                             |  |               | (53     | ) |      |  | (70    | )    | 
|Cash at end of the year                                               |  |               | 6,758   |   |      |  | 10,558 |      | 



The
accompanying notes are an integral part of these consolidated financial statements





F-7







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
1 - General



Reporting
entity



Kitov
Pharmaceuticals Holdings Ltd. (hereinafter: “the Company”) is an Israeli company, that was incorporated in Israel
as a private company in August 1968, and has been listed for trading on the Tel Aviv Stock Exchange since September 1978. In October
2012, the Company disposed of all of its previous operations, and in July, 2013, the Company acquired shares of Kitov Pharmaceuticals
Ltd. (hereinafter: “Kitov”) from its shareholders, in exchange for the Company’s shares (hereinafter: “the
Acquisition”).



The
Company’s securities (American Depository Shares (“ADS”) as well as Series A warrants) were listed for trading
on the NASDAQ in November 2015. Each ADS represents 20 ordinary shares with no par value. Each warrant enables the purchase of
1 ADS.



The
Company’s address is One Azrieli Center, Round Tower, 132 Menachem Begin Road, Tel Aviv 6701101 Israel.



The
Company together with Kitov are referred to, in these financial statements, as “the Group”.



As
of the date of the financial statements, the Group is engaged, through Kitov, in the development of combination drugs that treat
two clinical conditions simultaneously, pain caused by osteoarthritis and hypertension.



Since
incorporation through December 31, 2016, the Company has incurred losses and negative cash flows from operations mainly attributed
to its development efforts and has an accumulated deficit of USD 26.2 million. The Company has financed its operations mainly
through private and public financing rounds. In November 2015 and July 2016, the Company raised a total of USD 20.5 million net,
which management believes will allow the Company to complete its current development plans. At present, the Company has no revenue
and may require additional funding for future plans.



Note
2 - Basis of Preparation of the Financial Statements



| | A. | Statement of compliance with International Financial
Reporting Standards
| | -- | ------------------------------------------------------------------------



The
Company has prepared the financial statements in accordance with International Financial Reporting Standards (hereinafter: “IFRS”),
as issued by the International Accounting Standard Board (“IASB”).



These
financial statements have been approved by the board of directors on March 27, 2017.



| | B. | Functional and presentation currency
| | -- | ------------------------------------



These
financial statements are presented in US dollars (USD), which is the Group’s functional currency, rounded to the nearest one thousand,
unless otherwise noted. The USD is the currency that represents the principal economic environment in which the Group operates.



| | C. | Use of estimates and judgment
| | -- | -----------------------------



The
preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.



Management
prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according
to the pertinent circumstances of each estimate.



F-8







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
2 - Basis of Preparation of the Financial Statements (continued)



The
preparation of accounting estimates used in the preparation of the Group’s financial statements requires management of the
Company to make assumptions regarding circumstances and events that involve considerable uncertainty.



Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in
which the estimates are revised and in any future periods affected.



| | D. | Fair value determination of share-based payments
| | -- | ------------------------------------------------



In
preparing these financial statements, the Group is required to determine the fair value of share-based payment arrangements. The
Group uses observable market data as far as possible. Further information about the assumptions made in measuring fair value of
share based payments, is included in note 9.



| | E. | Exchange
                                         rates and linkage bases
| | -- | -------------------------------------------------------------------------



Balances
in foreign currency or linked thereto are included in the financial statements at the representative exchange rates, as published
by the Bank of Israel, which were prevailing as of the statement of financial position date.



Data
on exchange rates are as follows:



| |                               |  | Representative     |      
| | ----------------------------- |  | ------------------ | -----
| |                               |  | exchange rate of $ |      
| |                               |  | (NIS/$ 1)          |      
| | Date of financial statements: |  |                    |      
| | December 31, 2016             |  |                    | 3.845
| | December 31, 2015             |  |                    | 3.902
| | December 31, 2014             |  |                    | 3.889



| | Changes in exchange rates for the Year ended: |  | % |     
| | --------------------------------------------- |  | - | ----
| |                                               |  |   |     
| | December 31, 2016                             |  |   | (1.5
| | December 31, 2015                             |  |   | 0.3 
| | December 31, 2014                             |  |   | 12.0



Note
3 - Significant Accounting Policies



The
accounting policies set out below have been consistently applied for all periods presented in these consolidated financial statements



| | A. | Subsidiary
| | -- | ----------



A
subsidiary is an entity controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of the subsidiary are included in the consolidated financial statements from the date that control commences
until the date that control is lost.



F-9







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
3 - Significant Accounting Policies (continued)



| | B. | Foreign currency transactions
| | -- | -----------------------------



Transactions
in foreign currency are translated to the functional currency of Group companies at exchange rates as of the transaction
dates. Monetary assets and liabilities denominated in foreign currency as of the reporting date are translated into the
functional currency at the exchange rate as of the said date. Exchange rate differences with respect to monetary items are
the differences between the amortized cost in the functional currency as of the start of the year, adjusted for the effective
interest during the year, and the amortized cost in foreign currency, translated at the exchange rate as of the end of the
year. Non-monetary items denominated in foreign currency and measured at historical cost, are translated using the exchange
rate as of the transaction date. Exchange rate differences arising from translation into the functional currency are
recognized on the statement of operations as financial expenses.



| | C. | Derivative and Non-derivative financial instruments
| | -- | ---------------------------------------------------



| | 1. | Non-Derivative
                                         financial instruments
| | -- | -----------------------------------------------------------------------------



| | a. | Non-derivative
                                         financial assets
| | -- | ------------------------------------------------------------------------



Non-derivative
financial assets include: cash and cash equivalents, short term deposits and other receivables.



Cash
and cash equivalents include cash balances available for immediate use and call deposits. Cash equivalents include short-term
highly liquid investments (with original maturities of three months or less) that are readily convertible into known amounts of
cash and are exposed to insignificant risks of change in value.



| | b. | Non-derivative
                                         financial liabilities
| | -- | -----------------------------------------------------------------------------



Non-derivative
financial liabilities include: accounts payables and other accounts payable.



Initial
recognition of financial liabilities



The
Group initially recognizes debt instruments issued as they are created. Other financial liabilities are initially recognized on
the trade date on which the Group becomes party to contractual terms of the instrument.



Financial
liabilities are initially recognized at fair value less any attributable transaction costs. Subsequent to initial recognition,
financial liabilities are measured at amortized cost using the effective interest method.



Transaction
costs directly attributable to an expected issuance of an instrument that will be classified as a financial liability are recognized
as an asset as part of deferred expenses in the statement of financial position. These transaction costs are deducted from the
financial liability upon their initial recognition, or are amortized as financing expenses in the statement of operations when
the issuance is no longer expected to occur.



De-recognition
of financial liabilities



Financial
liabilities are de-recognized upon expiration of the Group’s liability, as set forth in the agreement, or when disccharged or
cancelled.



F-10







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
3 - Significant Accounting Policies (continued)



| | 2. | Derivative
                                         financial liabilities
| | -- | -------------------------------------------------------------------------



The
Group holds derivative financial instruments that do not serve hedging purposes, including separable embedded derivatives.



Measurement
of derivative financial instruments



Derivatives
are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent
to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.



The
changes in fair value of these derivatives are recognized in profit or loss, as financing income or expense. Included in this
accounting treatment are changes in the fair value of the conversion component of NIS-linked warrants that do not have a fixed
exercise price. The fair value of these derivatives is based on market price, and classified as level 1.



| | D. | Intangible
    assets – research and development costs
| | -- | ------------------------------------------------------



Expenditure
on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized
in profit or loss when incurred.



Development
activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure
is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible,
future economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to
use or sell the asset. The expenditure capitalized in respect of development activities includes the cost of materials, direct
labor and overhead costs that are directly attributable to preparing the asset for its intended use, and capitalized borrowing
costs. Other development expenditure is recognized in profit or loss as incurred. In subsequent periods, any capitalized development
expenditure is measured at cost less accumulated amortization and accumulated impairment losses.



As
the Company has not met the criteria mentioned above, all development costs are currently recognized in profit and loss as expense.



| | E. | Loss per share
| | -- | --------------



The
Group presents loss per share data for its ordinary share capital. Loss per share is calculated by dividing the loss attributable
to holders of ordinary shares, by the weighted average number of ordinary shares outstanding during the period.



| | F. | Transactions
    with controlling shareholder
| | -- | ---------------------------------------------



Assets
and liabilities included in a transaction with a controlling shareholder are measured at fair value on the date of the transaction.
As the transaction is on the equity level, the Company includes the difference between the fair value and the consideration from
the transaction in its equity.



F-11







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
3 - Significant Accounting Policies (continued)



| | G. | Share-based payment transactions
| | -- | --------------------------------



The
fair value of share-based payment grants to employees and officers is recognized as payroll expense, against equity, over the
period in which eligibility for such grant is earned. The amount charged as share-based payment grants expense is contingent on
vesting conditions, which are service or performance conditions and is adjusted to reflect the number of grants expected to vest.
As for share-based payment grants contingent on non-vesting conditions, or on vesting conditions which are performance conditions
connected to market conditions, the Company accounts for these conditions when estimating the fair value of such grants; therefore
the Company recognizes an expense with respect to these grants, regardless of fulfillment of these conditions.



| | H. | Financing income and expense
| | -- | ----------------------------



Finance
income comprises changes in the fair value of the financial liability through profit and loss, and income from short term deposits.



Finance
expenses include loss from exchange rate differences. Interest expense is recognized, using the effective interest method. In
the statements of cash flows, interest received and interest paid are presented as part of cash flows from financing activities



| | I. | Equity
| | -- | ------



Incremental
costs directly attributable to an expected issuance of an instrument that will be classified as equity are recognized as an asset
in deferred expenses in the statement of financial position. The costs are deducted from the equity upon the initial recognition
of the equity instruments, or are expensed as financing expenses in the statement of operations when the issuance is no longer
expected to take place.



| | J. | Issuance
                                         of units of securities
| | -- | ------------------------------------------------------------------------



The
consideration received from the issuance of units of securities is attributed initially to financial liabilities that are measured
each period at fair value through profit or loss, and then to financial liabilities that are measured only upon initial recognition
at fair value. The remaining amount is the value of the equity component.



Direct
issuance costs are attributed to the specific securities in respect of which they were incurred, whereas joint issuance costs
are attributed to the securities on a proportionate basis according to the allocation of the consideration from the issuance of
the units, as described above.



| | K. | Employee benefits
| | -- | -----------------



The
Group has a number of post-employment benefit plans. The plans are usually financed by deposits with insurance companies or with
funds managed by a trustee, and they are classified as defined contribution plans and as defined benefit plans.



A
defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity
and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension
plans are recognized as an expense in profit or loss in the periods during which related services are rendered by employees.



F-12







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
3 - Significant Accounting Policies (continued)



Other
long-term employee benefits



The
Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit
that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine
its present value, and the fair value of any related assets is deducted



Note
4 - Cash and Cash Equivalents



| |                             |  | As of December 31 |      
| | --------------------------- |  | ----------------- | -----
| |                             |  | 2016              |      
| |                             |  | USD thousands     |      
| |                             |  |                   |      
| | Balance in USD              |  |                   | 4,980
| | Balance in other currencies |  |                   | 1,778
| | Total cash                  |  |                   | 6,758



Note
5 - Other Receivables



| |                                     |  | As of December 31 |    
| | ----------------------------------- |  | ----------------- | ---
| |                                     |  | 2016              |    
| |                                     |  | USD thousands     |    
| | Government authorities – mainly VAT |  |                   | 151
| | Prepaid expenses                    |  |                   | 90 
| |                                     |  |                   |    
| | Total receivables                   |  |                   | 241



Note
6 - Subsidiary



The
following is condensed information regarding the subsidiary directly held by the Company:



| |                            |  | Incorporated and operates |  | Group’s ownership |     |   | Company’s direct ownership of |  |     | Amounts provided by the Company to the subsidiary |  |  | Total investment in | 
| | -------------------------- |  | ------------------------- |  | ----------------- | --- | - | ----------------------------- |  | --- | ------------------------------------------------- |  |  | ------------------- | 
| |                            |  | in Israel                 |  | equity            |     |   | equity                        |  |     | Loans                                             |  |  | Guarantees          | 
| |                            |  |                           |  |                   |     |   |                               |  |     | USD thousands                                     | 
| |                            |  |                           |  |                   |     |   |                               |  |     |                                                   |  |  |                     | 
| | Kitov Pharmaceuticals Ltd. |  | Israel                    |  |                   | 100 | % |                               |  | 100 | %                                                 |  |  | 13,157              | 





F-13







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note 7- Other Payables



| |                                  |  | As of December 31 |    
| | -------------------------------- |  | ----------------- | ---
| |                                  |  | 2016              |    
| |                                  |  | USD thousands     |    
| | Due to related parties (note 10) |  |                   | 548
| | Accrued expenses                 |  |                   | 76 
| | Payroll related payables         |  |                   | 134
| |                                  |  |                   | 758



Note
8 - Equity



| | A. | The Company’s
    share capital
| | -- | -------------------------------



| |                                        |  | As of December 31,
 2016  |       |  | As of December 31,
 2015 | 
| | -------------------------------------- |  | ------------------------- | ----- |  | ------------------------ | 
| |                                        |  | Number of shares thousand |      
| |                                        |  | Authorized                |       |  | Issued and paid-in       | 
| |                                        |  |                           |       |  |                          | 
| | Ordinary shares, no par value          |  | 5,000,000                 |       |  | 153,237                  | 
| | Class A preferred shares, no par value |  |                           | 2,000 |  |                          | 
| | Class B preferred shares, no par value |  |                           | 2,000 |  |                          | 
| | Class C preferred shares, no par value |  |                           | 2,000 |  |                          | 
| | Class D preferred shares, no par value |  |                           | 2,000 |  |                          | 
| | Class E preferred shares, no par value |  |                           | 2,000 |  |                          | 



| | B. | Changes in share capital during the year
| | -- | ----------------------------------------





| |                                                                              |  | For the year ended December 31 |        
| | ---------------------------------------------------------------------------- |  | ------------------------------ | -------
| |                                                                              |  | Number of shares thousand      |        
| |                                                                              |  | 2016                           |        
| | Issued as at January 1                                                       |  |                                | 77,756 
| | Issuance of ADSs                                                             |  |                                | 47,576 
| | Issuance of shares                                                           |  |                                | -      
| | Share issuance deriving from a strategic cooperation agreement (see note 11) |  |                                | 3,010  
| | Share issuance due to meeting of milestone                                   |  |                                | -      
| | Share based payments                                                         |  |                                | 669    
| | Exercise of warrants                                                         |  |                                | 24,226 
| | Exercise of options                                                          |  |                                | -      
| |                                                                              |  |                                |        
| | Issued as at December 31                                                     |  |                                | 153,237



F-14







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
8 - Equity (continued)



| | C. | Financing
                                         rounds during the year
| | -- | -------------------------------------------------------------------------



| | 1. | In
                                         July 2016, in a public offering on the NASDAQ, the Company raised USD 12 million (approximately
                                         $10.0 million net of placement agent fees and other offering related expenses).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
the public offering the Company issued securities as follows: (i) 2,378,823 Class A units - comprised of 2,378,823 ADSs and 2,378,823
Series A warrants to purchase 2,378,823 ADSs, and (ii) 1,150,589 Class B units - comprised of 1,150,589 prefunded Series B warrants
to purchase 1,150,589 ADSs and 1,150,589 Series A warrants to purchase 1,150,589 ADSs.



The
July 2016 public offering was completed at a price of USD 3.40 per unit. Each Series A warrant is exercisable through November
25, 2020 for an exercise price of USD 3.78, as adjusted following the July 2016 offering. All of the Series B warrants had been
exercised by August 31, 2016 for an exercise price of USD 0.01 per ADS.



In
addition, the Company granted representatives of the placement agent non-traded warrants to purchase up to 141,176 ADSs for an
exercise price of USD 4.08.



| | 2. | In
                                         November 2015, in a public offering on the NASDAQ, the Company raised USD 13.0 million,
                                         (approximately USD 10.6 million after deduction of underwriters’ commissions and
                                         public offering related expenses). On November 20, 2015, the Company’s ADSs and
                                         warrants commenced trading on the NASDAQ under the symbols KTOV and KTOVW, respectively.
                                         The public offering was completed on November 25, 2015.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
the November 2015 public offering the Company issued 3,158,900 ADSs and 3,158,900 Series A warrants to purchase 3,158,900 ADSs.
Each ADS represents 20 ordinary shares with no par value. Each warrant enables the purchase of 1 ADS. The public offering was
completed at a price of USD 4.13 for a unit of 1 ADS and 1 warrant. Each warrant is exercisable for a period of 5 years for an
initial exercise price of USD 4.13, which has since been adjusted to USD 3.78 (see note C.1. above). In addition, the Company
granted the underwriters the right to sell within 45 days up to 473,835 ADSs and/or 473,835 Series A warrants at the same terms
as the public offering (of which the underwriters exercised the right to sell 220,074 warrants). The Company also granted the
underwriters non-traded warrants to purchase up to 157,945 ADSs for an exercise price of USD 4.956.



| | D. | Other
                                         equity transactions during the year
| | -- | ----------------------------------------------------------------------------------



| | 1. | During
                                         the year, the Company issued 669,100 shares to service providers for services granted.
                                         The fair value of the shares was measured at the fair value of the services, and amounted
                                         to USD 103 thousand.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                        

| | 2. | In
                                         May 2016 the Company issued 3,009,888 shares to Dexcel Ltd. following meeting a milestone
                                         in accordance with the agreement between the Company and Dexcel Ltd. The fair value of
                                         the shares was USD 500 thousand.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                

| | 3. | During
                                         the year the Company issued 1,214,340 shares derived from the exercise of Series A warrants,
                                         for proceeds of USD 302 thousand.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-15







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
9 - Share-based Payment Arrangements



| | A. | In February 2015, the Company’s board of directors decided to grant 44,786 options to two
consultants in return for their services. The options are exercisable into 44,786 shares for an exercise price of NIS 4.00 for
a period of 24 months. The options vested immediately on the grant date, May 14, 2015. The fair value of these options at the
date of granting was measured at USD 31 thousand.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
May 2016 and June 2016, the Company granted 7,281,370 options to the chairman of board of directors, chief executive officer,
chief financial officer, senior employees and a service provider. Each option may be exercised into one ordinary share, at an
exercise price of NIS 0.7884 ($0.205) per share over a vesting period of 3 years. The exercise period is 8 years from date of
issuance provided, however that with respect to 5,957,485 thousand of the options granted to directors of the Company, no options
are exercisable prior to the Company’s adoption of a revised compensation policy in accordance with the Companies Law.



In
June 2016, the Company approved the future grant of options to the chairman of the board of directors in order to maintain a number
of options reflecting a certain percentage of holdings in the Company, subject to certain conditions as determined by the board
of directors. Accordingly, an additional 2,468,759
options were granted.



The
fair value of these options at the date of the grant was measured at USD 680 thousand.



| | B. | Other share based payment arrangements
| | -- | --------------------------------------



See
note 11 with regard to share based payments to a strategic cooperation service provider, and note 8D with regards to share based
payments to service providers.



| | C. | The number and weighted average exercise prices (in
NIS) of share options are as follows:
| | -- | -----------------------------------------------------------------------------------------



| |                            |  | Weighted average exercise price |      |  | Number of options | 
| | -------------------------- |  | ------------------------------- | ---- |  | ----------------- | 
| |                            |  | 2016                            |      |  | 2015              | 
| | Outstanding at January 1   |  |                                 | 0.81 |  |                   | 
| | Expired during the year    |  |                                 | 0.81 |  |                   | 
| | Exercised during the year  |  |                                 | -    |  |                   | 
| | Granted during the year    |  |                                 | 0.79 |  |                   | 
| | Outstanding at December 31 |  |                                 | 0.83 |  |                   | 
| | Exercisable at December 31 |  |                                 | 0.96 |  |                   | 





The
options outstanding at December 31, 2016 had an exercise price in the range of NIS 0.79 – NIS 4 (2015 - NIS 0.65 –
NIS 4), and weightedaverage contractual life of 7.7 years (2015 – 2.9 years).



F-16







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
9 - Share-based Payment Arrangements (continued)



| | D. | Options
                                         to service providers were measured at the fair value of the service, when available.
                                         The fair value of the Company’s
                                         share options granted to employees, directors and service providers, where fair value
                                         of service was not measurable, was estimated using the fair value of the traded warrants
                                         with similar terms, making some adjustments to reflect the specific terms of the options
                                         based on the expected duration. For 2014 grants, the fair value was estimated using the
                                         Black Scholes model. The following assumptions were used:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                  |  | 2016 |           |  | 2015 |  |   | 2014 | 
| | -------------------------------- |  | ---- | --------- |  | ---- |  | - | ---- | 
| |                                  |  |      |           |  |      |  |   |      | 
| | Share Price - NIS                |  |      | 0.21-0.26 |  |      |  | - |      | 
| | Warrant price - USD              |  |      | 1.07-1.42 |  |      |  | - |      | 
| | Expected volatility (%)          |  |      | -         |  |      |  | - |      | 
| | Expected duration (years)        |  |      | 4-8       |  |      |  | - |      | 
| | Dividend yield (%)               |  |      | 0         |  |      |  | - |      | 
| | Risk free rate interest rate (%) |  |      | N/A       |  |      |  | - |      | 



| | E. | Expenses
                                         recognized in the financial statements:
| | -- | -----------------------------------------------------------------------------------------





| |                                      |  | For the year ended December 31 |    
| | ------------------------------------ |  | ------------------------------ | ---
| |                                      |  | 2016                           |    
| |                                      |  | USD thousands                  |    
| | Total share-based expense recognized |  |                                | 400



Note
10 - Transactions and Balances with Related Parties



| | A. | Related
                                         party balances are included in the balance sheet under the following items:
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| |                                     |  | As of December 31 |    
| | ----------------------------------- |  | ----------------- | ---
| |                                     |  | 2016              |    
| |                                     |  | USD thousands     |    
| |                                     |  |                   |    
| | Other payables                      |  |                   | 548
| | Post-employment benefit liabilities |  |                   | 227



| | B. | The
                                         statement of operations includes amounts referring to transactions with related parties,
                                         as follows:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                     |  | For the year ended December 31 |    
| | ----------------------------------- |  | ------------------------------ | ---
| |                                     |  | 2016                           |    
| |                                     |  | USD thousands                  |    
| | General and administrative expenses |  |                                | 781
| | Research and development expenses   |  |                                | 652
| | Interest and linkage expenses       |  |                                | -  



F-17







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
10 - Transactions and Balances with Related Parties (continued)



| | C. | The
                                         statement of changes in equity for the years ended December 31, 2016 and 2015 includes
                                         amounts referring to transactions with related parties of USD 363 thousand and USD
                                         526 thousand, respectively, which are included in the issuance costs of the ADSs. See
                                         also note 11C.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | D. | Service agreements with related
    parties
| | -- | -------------------------------------------



| | 1. | Agreement
                                         for consulting services with a company owned by Dr. Paul Waymack, commencing January
                                         2016 is USD 20 thousand monthly.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Agreement
                                         with Mr. Simcha Rock for his full time services to the Company as the Company’s CFO.
                                         The monthly payment is NIS 50 thousand (USD 13 thousand).
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Up
                                         until May 2016, Mr. Israel’s basic salary was NIS 40 thousand per month (USD 10 thousand)
                                         and linked to the Consumer Price Index. Since May 2016 Mr. Israel is employed as a service
                                         provider. The monthly payment is NIS 68 thousand (USD 18 thousand).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
addition, Dr. Waymack, Mr. Rock, and Mr. Israel are entitled to annual and special bonuses, as well as retirement grants see Note
11.C and D.



| | E. | The
                                         Company made payments to key management:
| | -- | -------------------------------------------------------------------------------------



| |                                |  | For the year ended December 31 |      
| | ------------------------------ |  | ------------------------------ | -----
| |                                |  | 2016                           |      
| |                                |  | USD thousands                  |      
| | Short - term employee benefits |  |                                | 1,336
| | Post-employment benefits       |  |                                | 25   
| | Share based payments           |  |                                | 244  
| |                                |  |                                | 1,605



Note
11  - Commitments and contingent liabilities



| | A. | In
                                         April 2014, the Company signed a strategic cooperation agreement with Dexcel Ltd. (hereinafter:
                                         “Dexcel”), including for formulation development services for the
                                         drug KIT-302 (hereinafter: “the drug”), the right to negotiate the
                                         commercial manufacture of the drug, and the right to negotiate the marketing of the drug.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
consideration for the services provided by Dexcel, the Company paid USD 2 million in 4 equal USD 0.5 million payments, and USD
1.5 million worth of shares in 3 tranches of USD 0.5 million each. The first tranche of 157,783 shares was issued at a price of
NIS 11.05 per share, the second tranche of 597,511 shares was issued in May 2015 at a price of NIS 3.359 per share, and the final
tranche of 3,009,888 shares was issued in June 2016 at a price per share of NIS 0.63.



Dexcel
paid the Company USD 0.5 million in 2 payments upon completion of milestones, for the right to negotiate the global marketing
rights and the commercial manufacturing of the drug. The first payment was received in May 2015, and the second payment was paid
in June 2016. Payments made to Dexcel, net of receipts from Dexcel, were charged to research and development expenses based on
milestones achieved.



F-18







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
11 - Commitments and contingent liabilities (continued)



The
intellectual property (hereinafter -“IP”) owned by the Company prior to this agreement will continue to be
owned by the Company. Dexcel was granted the right to use the Company’s IP for the purpose of development of the drug. Any
IP developed in the process of the drug’s development and manufacturing will be owned jointly by the Company and Dexcel,
and the Company and Dexcel will give each other the right to use this IP. In addition, any IP developed by Dexcel in the process
of the drug’s development and manufacturing, and which is not under the joint IP, will be owned by Dexcel, and Dexcel will
give the Company the right to use it in connection with the drug.



| | B. | The
                                         Company has an annual commitment under a lease agreement for its office premises of approximately
                                         NIS 240 thousand per year (approximately USD 62 thousand) through the end of 2019.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | The
                                         Company’s Chairman of the Board, Chief Executive Officer, and Chief Financial Officer
                                         are entitled to annual and special bonuses under the terms of their employment and consulting
                                         agreements. These bonuses will become due upon the achievement of certain milestones,
                                         including fund raising, merger transactions, and agreements for the commercialization
                                         of the Company’s products. These financial statements include bonuses in the amount
                                         of USD 848 thousand for the year ended December 31, 2016, and USD 599 thousand for the
                                         year ended December 31, 2015, of which USD 363 thousand and USD 526 thousand, respectively,
                                         are included in the statement of changes in equity as part of issuance costs of ADSs,
                                         see note 17.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | D. | The
                                         Company’s Chairman of the Board, Chief Executive Officer, and Chief Financial Officer
                                         are entitled to retirement grants under the terms of their employment and consulting
                                         agreements. These grants are measured based on the time of service and their monthly
                                         pay. These financial statements include a liability due to these grants of USD 256 thousand
                                         and USD 185 thousand, as of December 31, 2016 and 2015.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | E. | In
                                                                                                                                                                                                                                                                                                                                                                                        December 2015, a lawsuit and a motion to approve such lawsuit as a class action was filed
                                                                                                                                                                                                                                                                                                                                                                                        against the Company and its directors by shareholders who were holding the Company’s
                                                                                                                                                                                                                                                                                                                                                                                        Tel Aviv Stock Exchange listed securities before the offering mentioned in note 8C5,
                                                                                                                                                                                                                                                                                                                                                                                        claiming damages for the purported class in the motion totaling NIS 16.4 million (USD
                                                                                                                                                                                                                                                                                                                                                                                        4.3 million) due to the said offering. The Company has delivered its response to the
                                                                                                                                                                                                                                                                                                                                                                                        court in accordance with applicable law, and a preliminary hearing was held by the court
                                                                                                                                                                                                                                                                                                                                                                                        on September 12, 2016. At that hearing the court determined that certain claims of the
                                                                                                                                                                                                                                                                                                                                                                                        petitioners in connection with alleged personal interests by affiliates of the Company
                                                                                                                                                                                                                                                                                                                                                                                        in connection with the public offering of our initial public offering of our securities
                                                                                                                                                                                                                                                                                                                                                                                        in the U.S. during November 2015 are not part of the grounds for the Motion and no remedies
                                                                                                                                                                                                                                                                                                                                                                                        shall be sought by the petitioners in connection therewith. The court set a schedule
                                                                                                                                                                                                                                                                                                                                                                                        for the submission by the petitioners of a motion for discovery, and any responses to
                                                                                                                                                                                                                                                                                                                                                                                        such motion. An additional preliminary hearing was held on February 7, 2017. At that
                                                                                                                                                                                                                                                                                                                                                                                        hearing the court ruled on the scope of the petitioners’ motion for discovery, and pursuant to such ruling the Company
                                                                                                                                                                                                                                                                                                                                                                                        delivered to the petitioners (subject to signing confidentiality undertakings) certain protocols of the board of directors of
                                                                                                                                                                                                                                                                                                                                                                                        the Company. An additional preliminary hearing was scheduled for April 27, 2017.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
November 8, 2016, a shareholder of the Company submitted a request to the court in connection with the Motion to be excluded
from the Purported Class and claiming to have independent causes of action and claims of approximately NIS 1 million (the
“Petition to Exclude”). The Company responded to the court as required, and, amongst other arguments, the Company
noted that pursuant to the Class Action Lawsuits Law 5766-2006 and the Regulations enacted thereunder, at the current stage
of the court proceedings with respect to the Motion, such shareholder cannot petition to be excluded from the Purported
Class. The court ordered the shareholder to respond to its response and he has done so. The shareholder has not submitted any
independent lawsuit against the Company, and the Company is of the view that such shareholder’s claims are identical to
the asserted claims for damages in the Motion.





F-19







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
11  - Commitments and contingent liabilities (continued)



The
Company’s management rejects the claims asserted in the Motion as well as in the Petition to Exclude, and, in
consultation with its legal advisors, believes that the likelihood of the company not incurring any financial obligation as a
result of this class action exceeds the likelihood that the company will incur a financial obligation. Therefore, no
provision for this matter was recorded in these financial statements.



| | F. | In
                                         February 2017 the Company announced that the Israeli Securities Authority has begun a
                                         formal investigation into, amongst other matters, the Company’s public disclosures
                                         in connection with the Data Monitoring Committee (DMC) appointed in connection with the
                                         Company’s Phase III trial of KIT-302, the results of which were announced in December
                                         2015, and what information regarding the DMC was disclosed publicly by Kitov. A DMC is
                                         generally an external independent group of experts who monitor patient safety and treatment
                                         efficacy data while a clinical trial is ongoing, and in the case of the KIT-302 Phase
                                         III clinical trial was established in order to analyze the preliminary results of the
                                         initial patient group enrolled in the clinical trial and determine the number of additional
                                         patients, if any, that Kitov might have needed to recruit in order to demonstrate statistical
                                         validity, and to meet the primary end point of the clinical trial.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
February 2017, four lawsuits and motions to approve the lawsuits as a class action lawsuit (each, a “Motion”),
were filed against the Company and certain of its office holders at the Tel Aviv District Court (Economic Division), and
served on the Company, with each Motion relating to the above noted formal investigation by the Israeli Securities Authority
(ISA) into the Company’s public disclosures. The Motions were filed against the Company and various former and present
officers of the Company, on behalf of shareholders of the Company who are requesting to act as representative of all
shareholders of record during various periods of time from December 10, 2015 until February 6, 2017. The plaintiffs in the
various Motions allege, among other things, that the Company included misleading information in its public filings, which
caused the class for which the plaintiffs are seeking recognition an aggregate loss ranging between NIS 25,545,206
(approximately US$ 6,818,000) and NIS 36,525,592 (approximately US$ 9,748,000). The petitioners in one of the above noted
Motions has motioned to the court to dismiss the other 3 Motions. The court has granted the petitioners in the other 3
Motions, as well as the Company and the other defendants, until March 28, 2017 to respond to this motion to dismiss the other
3 Motions.



On
February 7, 2017, a holder the Company’s securities listed on the NASDAQ filed in the United States District Court (Southern
District of New York), a federal securities class action against the Company, its CEO and CFO, seeking unspecified damages and
relief in connection with, amongst other things, damages alleged to have occurred due to the purchasers of the Company’s
securities in the Company’s initial public offering in the USA on November 20, 2015, as well as in open market purchases,
as a result of the Company allegedly including misleading information in its public filings. This lawsuit was served on the Company’s
agent for service in the USA on March 22, 2017. An initial pretrial conference has been scheduled by the court for March 30, 2017.



On
February 10, 2017, a holder the Company’s securities listed on the NASDAQ filed in the Superior Court of the State of
California, a securities class action against the Company, its CEO and CFO and the underwriters in the Company’s
initial public offering in the USA on November 20, 2015, seeking unspecified damages and relief in connection with, amongst
other things, damages alleged to have occurred due to the purchasers of the Company’s securities in such public
offering as a result of the Company allegedly including misleading information in its public filings. This lawsuit was served
on the Company’s agent for service in the USA on March 3, 2017. A case management conference has been scheduled by the
court for June 9, 2017.





F-20







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
11  - Commitments and contingent liabilities (continued)



On
March 20, 2017, a holder the Company’s securities listed on the NASDAQ filed in the Superior Court of the State of California,
a securities class action against the Company, its CEO and CFO and the underwriters in the Company’s initial public offering
in the USA on November 20, 2015, seeking unspecified damages and relief in connection with, amongst other things, damages alleged
to have occurred due to the purchasers of the Company’s securities in such public offering as a result of the Company allegedly
including misleading information in its public filings. This lawsuit has not yet been served on the Company’s agent for
service in the USA. A case management conference has been scheduled by the court for July 26, 2017.



The
Company’s management rejects the claims in all of the aforesaid Motions and class action lawsuits. At this preliminary stage
the Company is unable, with any degree of certainty, to make any evaluations or any assessments with respect to the Motions’
and/or lawsuits in the U.S.A. and in Israel as to the probability of success or the scope of potential exposure, if any. Therefore,
no provision for this matter was recorded in these financial statements.



Note
12 - Research and Development Expenses



Research
and development expenses include consulting expenses for development of drug formulation and for non-clinical, clinical, regulatory
and project management work required for the Company’s drug portfolio.



Note
13 - General and Administrative Expenses



| |                                                                                   |  | For the year ended December 31 |      
| | --------------------------------------------------------------------------------- |  | ------------------------------ | -----
| |                                                                                   |  | 2016                           |      
| |                                                                                   |  | USD thousands                  |      
| | Employee and officer compensation including share-based payment, see also Note 9) |  |                                | 1,252
| | Professional consulting                                                           |  |                                | 1,143
| | Board member remuneration and insurance                                           |  |                                | 155  
| | Rent and office maintenance                                                       |  |                                | 94   
| | Travel                                                                            |  |                                | 99   
| | Car expenses                                                                      |  |                                | 42   
| | Depreciation                                                                      |  |                                | 2    
| | Other                                                                             |  |                                | 216  
| |                                                                                   |  |                                |      
| |                                                                                   |  |                                | 3,003



F-21







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
14 - Other Expense



As
part of the Acquisition, Haiku, a wholly owned company of the controlling shareholder at the time of the transaction, was eligible
to receive, out of all funds raised by the Company in one or multiple transactions, an amount of up to NIS 2,500 thousand. Following
the share issuance described in Note 8C1, an amount of NIS 2,500 thousand (USD 720 thousand) was paid to Haiku. This amount was
recorded as other expenses in 2014.



Note
15 - Finance Expense (Income)



| |                                         |  | For the year ended December 31 |      
| | --------------------------------------- |  | ------------------------------ | -----
| |                                         |  | 2016                           |      
| |                                         |  | USD thousands                  |      
| | Change in fair value of derivatives     |  |                                |      
| | Expenses *                              |  |                                | 5,160
| | Income                                  |  |                                | (141 
| | Net change in fair value of derivatives |  |                                | 5,019



| | * | This expense related to the fair value
adjustments of the Series A warrants. The warrants include an anti-dilution provision whereby the exercise price of the Series
A warrants are subject to “weighted average” ratchet anti-dilution provision, so that upon future issuance of the
Company’s ADSs or an equivalent number of ordinary shares, subject to specified exceptions, at a price less than the exercise
price then in effect, the exercise price will be reduced.The ratchet expired on November
25, 2016.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| |                                          |  | For the year ended December 31 |   
| | ---------------------------------------- |  | ------------------------------ | --
| |                                          |  | 2016                           |   
| |                                          |  | USD thousands                  |   
| |                                          |  |                                |   
| | Finance expense                          |  |                                |   
| | Fees and interest expense                |  |                                | 6 
| | Loss from exchange rate differences, net |  |                                | 55
| | Credit allocation fee **                 |  |                                | - 
| | Warrant issuance costs                   |  |                                | - 
| |                                          |  |                                | 61





| | ** | In
                                         August 2015 the Company entered into loan agreements with several third parties (the
                                         “Lenders”) pursuant to which, they extended the Company loans of USD 430 thousand.
                                         The loans were repaid in November 2015 with an addition of credit allocation fees in
                                         the amount of $141 thousand.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                          |  | For the year ended December 31 |    
| | ---------------------------------------- |  | ------------------------------ | ---
| |                                          |  | 2016                           |    
| |                                          |  | USD thousands                  |    
| | Finance income                           |  |                                |    
| |                                          |  |                                |    
| | Interest income from short term deposits |  |                                | 138



F-22







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
16 - Taxes on Income



| | A. | Corporate tax rate
| | -- | ------------------



The
tax rate applicable to the Company for 2016 is 25%. The tax rate in 2017 is expected to be 24%.



| | B. | The
                                         Company and its subsidiary incurred losses in 2016, as well as carry-forward losses from
                                         previous years, which are not expected to be utilized in the foreseeable future. Therefore
                                         the Group companies did not record current taxes or deferred taxes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
carry-forward loss for tax purposes for the Company and its subsidiary, and the unrecognized deferred taxes from research and
development expenses, amounts to USD 13.2 million as of December 31, 2016 (2015 – USD 9 million, 2014 – USD 5 million).



| | C. | The
                                         Company’s 2012 tax assessment is deemed finalized, pursuant to section 145 of the Income
                                         Tax Ordinance. The subsidiary’s 2011 tax assessment is deemed finalized, pursuant
                                         to section 145 of the Income Tax Ordinance.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note
17 - Employee benefits



| | A. | Employee
                                         benefits include post-employment benefits and short term benefits.
| | -- | --------------------------------------------------------------------------------------------------------------------



Post-employment
benefits are part of key management compensation – see note 10 on related and interested parties. Balances include:



| |                          |  | December 31.  |    
| | ------------------------ |  | ------------- | ---
| |                          |  | 2016          |    
| |                          |  | USD thousands |    
| |                          |  |               |    
| | Short-term benefits      |  |               | 670
| | Post-employment benefits |  |               | 256



| | B. | Post-employment
                                         benefit plans – defined contribution plan
| | -- | --------------------------------------------------------------------------------------------------



The
Company has a defined contribution plan in respect of the Company’s liability in respect of its employees who are subject
to Section 14 of the Severance Pay Law – 1963.



| |                                                                                                 |  | Year ended December 31 |   
| | ----------------------------------------------------------------------------------------------- |  | ---------------------- | --
| |                                                                                                 |  | 2016                   |   
| |                                                                                                 |  | USD thousands          |   
| |                                                                                                 |  |                        |   
| | Amount recognized as general and administrative expense in respect of defined contribution plan |  |                        | 39



F-23







Kitov Pharmaceuticals Holdings Ltd.



Notes to the Consolidated Financial
Statements



Note
18  - Financial Instruments



Cash
and cash equivalents and short term deposits



The
Group held cash and cash equivalents and short term deposits of USD 14,657 thousand at December 31, 2016 (2015 – USD 10,558).
These are held with banks, which are rated A2, based on Moody’s Rating Agency ratings. The short term deposits, mainly in
USD, bear fixed interest ranging between 1.58% - 2.7%.



The
carrying amount of cash and cash equivalents and short term deposits approximate their fair value.



Note
19  - Subsequent Events



On
January 12, 2017 the Company acquired a controlling equity stake in TyrNovo Ltd. from its majority shareholder, for consideration
of USD 2 million in cash and 11,292,508 ordinary shares of Kitov, equivalent to USD 1.8 million based on the closing price of
the Company’s shares on the TASE on January 11, 2017.



TyrNovo,
a privately held developer of novel small molecules in the immuno-oncology therapeutic field, is developing NT219, a small molecule
that has demonstrated the potential to overcome resistance to multiple anti-cancer drugs. It presents a new concept in cancer
therapy by promoting the degradation signal proteins, Insulin Receptor Substrates (IRS) 1 and 2 as well as the inhibition of signal
transducer and activator of transcription 3 (STAT3), extensively blocking major oncogenic pathways, which are highly involved
in anti-cancer drug resistance.



On
February 9, 2017, the Company, TyrNovo and Taoz entered into a settlement arrangement in response to a motion filed on January
19, 2017 by Taoz - Company for Management and Holdings of Companies Ltd., a shareholder owning approximately 3% of TyrNovo. Among
other terms, these agreements include an undertaking by the Company to finance any future working capital requirement of
TyrNovo, up to an amount of USD 1 million, provided by way of Convertible Loan. As of March 20, 2017 the Company had placed loans
of USD 750,000.





F-24