# EDGAR Filing Document

**Accession Number:** 0001611842
**File Stem:** 0001213900-26-020370
**Filing Date:** 2026-2
**Character Count:** 777147
**Document Hash:** 1b718e6dd30090c84512a91fb291a9a9
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-020370.hdr.sgml**: 20260225

**ACCESSION NUMBER**: 0001213900-26-020370

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 88

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260225

**DATE AS OF CHANGE**: 20260225

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PolyPid Ltd.
- **CENTRAL INDEX KEY:** 0001611842
- **STANDARD INDUSTRIAL CLASSIFICATION:** SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
- **ORGANIZATION NAME:** 08 Industrial Applications and Services
- **EIN:** 000000000
- **STATE OF INCORPORATION:** L3
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38428
- **FILM NUMBER:** 26678345

**BUSINESS ADDRESS:**
- **STREET 1:** 18 HASIVIM STREET
- **CITY:** PETACH TIKVA
- **STATE:** L3
- **ZIP:** 4959376
- **BUSINESS PHONE:** 972-74-7195700

**MAIL ADDRESS:**
- **STREET 1:** 18 HASIVIM STREET
- **CITY:** PETACH TIKVA
- **STATE:** L3
- **ZIP:** 4959376

?xml version='1.0' encoding='ASCII'?

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2025

**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

Commission File No.: 001-38428

**POLYPID LTD.**

 *(Exact name of registrant as specified in its charter)*

*Translation of registrant's name into English: Not applicable*

**State of Israel**

*(Jurisdiction of incorporation or organization)*

**18 Hasivim Street**

**Petach Tikva 495376, Israel**

*(Address of principal executive offices)*

**Dikla Czaczkes Akselbrad Chief Executive Officer**

**PolyPid Inc.**

**372 Franklin Ave.**

**P.O. Box 558**

**Nutley, NJ 07110**

**Telephone: (908) 858-5995**

*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)*

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

---

| | | |
|:---|:---|:---|
| *Title of each class* | *Trading Symbol(s)* | *Name of each exchange on which registered* |
| **Ordinary Shares, no par value** | **PYPD** | **Nasdaq Capital Market** |

---

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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:

18,204,002 ordinary shares as of December 31, 2025.

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

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;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 Exchange Act of 1934.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;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 Exchange Act 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 ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

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

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☒ Emerging Growth Company ☐

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

U.S. GAAP ☒

International Financial Reporting Standards as issued by the International Accounting Standards Board ☐

Other ☐

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

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;No ☒

**TABLE OF CONTENTS** 

---

| | | | |
|:---|:---|:---|:---|
|  |  |  | **Page** |
| [INTRODUCTION](#a_001) | [INTRODUCTION](#a_001) | [INTRODUCTION](#a_001) | iii |
| [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#a_002) | [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#a_002) | [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#a_002) | iv |
| [SUMMARY RISK FACTORS](#a_003) | [SUMMARY RISK FACTORS](#a_003) | [SUMMARY RISK FACTORS](#a_003) | vi |
| [**PART I**](#a_004) | [**PART I**](#a_004) | [**PART I**](#a_004) | [**PART I**](#a_004) |
| ITEM 1. |  | [IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](#a_005) | 1 |
| ITEM 2. |  | [OFFER STATISTICS AND EXPECTED TIMETABLE](#a_006) | 1 |
| ITEM 3. |  | [KEY INFORMATION](#a_007) | 1 |
|  | A. | [\[Reserved\]](#a_008) | 1 |
|  | B. | [Capitalization and Indebtedness](#a_009) | 1 |
|  | C. | [Reasons for the Offer and Use of Proceeds](#a_010) | 1 |
|  | D. | [Risk Factors](#a_011) | 1 |
| ITEM 4. |  | [INFORMATION ON THE COMPANY](#a_012) | 53 |
|  | A. | [History and Development of the Company](#a_013) | 53 |
|  | B. | [Business Overview](#a_014) | 53 |
|  | C. | [Organizational Structure](#a_015) | 82 |
|  | D. | [Property, Plants and Equipment](#a_016) | 82 |
| ITEM 4.A |  | [UNRESOLVED STAFF COMMENTS](#a_017) | 82 |
| ITEM 5. |  | [OPERATING AND FINANCIAL REVIEW AND PROSPECTS](#a_018) | 83 |
|  | A. | [Operating Results](#a_019) | 83 |
|  | B. | [Liquidity and Capital Resources](#a_020) | 88 |
|  | C. | [Research and Development, Patents and Licenses, etc.](#a_021) | 92 |
|  | D. | [Trend Information](#a_022) | 92 |
|  | E. | [Critical Accounting Estimates](#a_023) | 93 |
| ITEM 6. |  | [DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](#a_024) | 95 |
|  | A. | [Directors and Senior Management](#a_025) | 95 |
|  | B. | [Compensation](#a_026) | 98 |
|  | C. | [Board Practices](#a_027) | 99 |
|  | D. | [Employees](#a_028) | 109 |
|  | E. | [Share Ownership](#a_029) | 109 |
|  | F. | [Action to Recover Erroneously Awarded Compensation](#a_030) | 109 |
| ITEM 7. |  | [MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](#a_031) | 110 |
|  | A. | [Major Shareholders](#a_032) | 110 |
|  | B. | [Related Party Transactions](#a_033) | 114 |
|  | C. | [Interests of Experts and Counsel](#a_034) | 114 |
| ITEM 8. |  | [FINANCIAL INFORMATION](#a_035) | 115 |
|  | A. | [Consolidated Statements and Other Financial Information](#a_036) | 115 |
|  | B. | [Significant Changes](#a_037) | 115 |
| ITEM 9. |  | [THE OFFER AND LISTING](#a_038) | 115 |
|  | A. | [Offer and Listing Details](#a_039) | 115 |
|  | B. | [Plan of Distribution](#a_040) | 115 |
|  | C. | [Markets](#a_041) | 115 |
|  | D. | [Selling Shareholders](#a_042) | 115 |
|  | E. | [Dilution](#a_043) | 115 |
|  | F. | [Expenses of the Issue](#a_044) | 115 |

---

i

---

| | | | |
|:---|:---|:---|:---|
| ITEM 10. |  | [ADDITIONAL INFORMATION](#a_045) | 116 |
|  | A. | [Share Capital](#a_046) | 116 |
|  | B. | [Memorandum and Articles of Association](#a_047) | 116 |
|  | C. | [Material Contracts](#a_048) | 116 |
|  | D. | [Exchange Controls](#a_049) | 117 |
|  | E. | [Taxation](#a_050) | 118 |
|  | F. | [Dividends and Paying Agents](#a_051) | 125 |
|  | G. | [Statement by Experts](#a_052) | 125 |
|  | H. | [Documents on Display](#a_053) | 125 |
|  | I. | [Subsidiary Information](#a_054) | 125 |
|  | J. | [Annual Report to Security Holders](#a_055) | 125 |
| ITEM 11. |  | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#a_056) | 126 |
| ITEM 12. |  | [DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](#a_057) | 126 |
|  | A. | [Debt Securities](#a_058) | 126 |
|  | B. | [Warrants and rights](#a_059) | 126 |
|  | C. | [Other Securities](#a_060) | 126 |
|  | D. | [American Depositary Shares](#a_061) | 126 |
| [**PART II**](#a_062) | [**PART II**](#a_062) | [**PART II**](#a_062) | [**PART II**](#a_062) |
| ITEM 13. |  | [DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](#a_063) | 127 |
| ITEM 14. |  | [MATERIAL MODIFICATIONS TO THE RIGHTS O7F SECURITY HOLDERS AND USE OF PROCEEDS](#a_064) | 127 |
| ITEM 15. |  | [CONTROLS AND PROCEDURES](#a_065) | 127 |
| ITEM 16. |  | [\[Reserved\]](#a_066) | 127 |
| ITEM 16. | A | [AUDIT COMMITTEE FINANCIAL EXPERT](#a_067) | 128 |
| ITEM 16. | B | [CODE OF ETHICS](#a_068) | 128 |
| ITEM 16. | C | [PRINCIPAL ACCOUNTANT FEES AND SERVICES](#a_069) | 128 |
| ITEM 16. | D | [EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES](#a_070) | 129 |
| ITEM 16. | E | [PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](#a_071) | 129 |
| ITEM 16. | F | [CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT](#a_072) | 129 |
| ITEM 16. | G | [CORPORATE GOVERNANCE](#a_073) | 129 |
| ITEM 16. | H | [MINE SAFETY DISCLOSURE](#a_074) | 130 |
| ITEM 16. | I | [DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.](#a_075) | 131 |
| ITEM 16. | J | [INSIDER TRADING POLICIES](#a_076) | 131 |
| ITEM 16. | K | [CYBERSECURITY](#a_077) | 131 |
| [**PART III**](#a_078) | [**PART III**](#a_078) | [**PART III**](#a_078) | [**PART III**](#a_078) |
| ITEM 17. |  | [FINANCIAL STATEMENTS](#a_079) | 133 |
| ITEM 18. |  | [FINANCIAL STATEMENTS](#a_080) | 133 |
| ITEM 19. |  | [EXHIBITS](#a_081) | 133 |

---

ii

![](image_001.jpg)

**INTRODUCTION**

We are an innovative biopharmaceutical company dedicated to improving patient outcomes by elevating treatment effectiveness, right where care begins. We develop long-acting, controlled-release medicines that deliver therapy precisely at the site of care, addressing critical unmet medical needs. Our diverse pipeline spans surgical care, metabolic diseases, and beyond. Our lead product candidate, D-PLEX<sub>100</sub>, pairs our novel proprietary PLEX technology with doxycycline, a broad spectrum and U.S. Food and Drug Administration, or FDA, approved antibiotic. D-PLEX<sub>100</sub> is administered directly into the surgical site during surgery and provides a prolonged and continuous release of high local concentration of doxycycline for a period of 30 days for the prevention of SSIs. Infections resulting from surgery can be fatal and create a significant public health burden despite the extensive use of systemically administered antibiotics both pre- and post-operatively and other measures taken to reduce infection risk in the intra-operative setting. We believe that D-PLEX<sub>100</sub>, if approved, would be a significant improvement over the current standard of care, or SoC, which includes systemic administration of antibiotics.

In June 2025, we announced positive topline results from our pivotal SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions. The primary efficacy endpoint of the study was successfully met, with a significantly lower proportion of primary endpoint events among patients who received D-PLEX<sub>100</sub> plus SoC (n=405; 10.9%), compared to SoC alone (n=393; 18.1%), representing a 40% reduction (p<0.005). The primary endpoint is the combination of deep and superficial SSIs, all-cause mortality and surgical reinterventions at the same incision of the original index surgery. SHIELD II also successfully met all three key secondary endpoints of the study. The first key secondary endpoint was met, with a 60% reduction in deep and superficial SSI rates among patients who received D-PLEX<sub>100</sub> plus SoC (3.8%) compared to those who received SoC alone (9.5%) (p<0.005). SHIELD II trial revealed a good safety profile with no difference in serious treatment-emergent adverse events between patients treated with D-PLEX₁₀₀ arm versus standard of care arm.

On December 3, 2025, we announced positive FDA pre-new drug application, or NDA, meeting minutes for D-PLEX₁₀₀ supporting an NDA submission. We expect to submit an NDA on a rolling basis beginning by the end of the first quarter of 2026 leveraging our Fast Track and Breakthrough Therapy designations.

In addition to our lead program D-PLEX<sub>100</sub>, our pipeline includes early-stage programs. In July 2025, we unveiled our long-acting GLP-1 receptor agonists (glucagon-like peptide-1 RA) delivery platform which aims to subcutaneously release GLP-1 RA for approximately 60 days, significantly longer than current weekly injection regimens. The platform enables linear drug release, potentially overcoming the burst release observed with currently marketed weekly formulations, and provides a foundation that can potentially be expanded beyond GLP-1 to support the development of additional incretin-based therapies.

OncoPLEX, PolyPid's lead intra-tumoral cancer therapy drug candidate, can potentially provide controlled local exposure to docetaxel, one of the most widely used chemotherapy agents, directly at the tumor site for several weeks to potentially reduce local tumor reoccurrence, the potential spreading of cancer cells, and ultimately improve the overall survival rate of cancer patients. OncoPLEX has been evaluated successfully in 9 various animal tumor models, both as adjuvant and neoadjuvant, including murine colon carcinoma, melanoma and glioblastoma animal models. In November 2021, a successful Pre-IND meeting with the FDA supported a Phase 1/2 clinical trial of OncoPLEX as a potential part of first-line combination therapy for patients newly diagnosed with Glioblastoma Multiform, or GBM.

In December 2024, we announced a new research and development collaboration with ImmunoGenesis, Inc., or ImmunoGenesis, a Houston-based clinical-stage biotechnology company to develop novel formulations combining our experience with our proprietary PLEX Technology and ImmunoGenesis' potent STimulator of INterferon Genes, or STING, agonist drug candidate to potentially enhance intratumoral treatment for solid tumors.

We intend to further expand research collaborations with biopharmaceutical and biotech companies leveraging our PLEX Technology. SHIELD II pharmacokinetic data validated the PLEX technology platform in large clinical trials, providing local and controlled release of drug molecules directly at the disease target organ over a pre-determined period of time. PLEX can be paired with a wide variety of marketed drugs or product candidates, including small molecules, peptides, antibodies and nucleic acid-based drugs. We intend to further engage in discussions with leading biopharmaceutical companies regarding licensing our PLEX technology for potential application in various therapeutic areas.

We successfully completed the Israeli Ministry of Health good manufacturing practice, or GMP, inspection, an important milestone advancing D-PLEX₁₀₀ toward commercial manufacturing readiness. The positive outcome of this inspection marks the fourth consecutive successful GMP inspection of our state-of-the-art, sterile manufacturing facility in Israel and further strengthens our regulatory submission readiness. We believe that this milestone further reinforces our path to commercialization as we prepare for potential market entry in both U.S. and European markets.

We are an Israeli corporation based in Israel near Tel Aviv, and were incorporated in 2008. Our Ordinary Shares are currently traded in the United States on the Nasdaq Capital Market under the symbol "PYPD".

iii

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Certain information included or incorporated by reference in this annual report on Form 20-F may be deemed to be "forward-looking statements". Forward-looking statements are often characterized by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "continue," "believe," "should," "intend," "project" or other similar words, but are not the only way these statements are identified.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

● the timing of our submission of an NDA and a marketing authorization application, or MAA;

● our ability to successfully receive approvals from the FDA, the European Medicines Agency, or EMA, or other applicable regulatory bodies, including approval to conduct clinical trials, the scope of those trials and the prospects for regulatory approval of, or other regulatory action with respect to our product candidates, including the regulatory pathway to be designated to our product candidates;

● our ability to license and commercialize our existing product candidates and future sales of our existing product candidates or any other future potential product candidates;

● our dependence on collaboration agreements with third parties to market and sell our product candidates;

● our ability to raise capital through the issuance of securities;

● our ability to prioritize development of certain product candidates over other potential candidates;

● our ability to advance the development of our product candidates, including the anticipated starting and ending dates of our anticipated clinical trials;

● our assessment of the potential of our product candidates to treat certain indications;

● our dependence on enrollment of patients in our clinical trials in order to continue development of our product candidates;

● the regulatory environment and changes in the health policies and regimes in the countries in which we operate, including the impact of any changes in regulation and legislation that could affect the pharmaceutical industry;

● our ability to meet our expectations regarding the commercial supply of our product candidates;

● the overall global economic environment;

● the impact of competition and new technologies;

iv

● general market, political and economic conditions in the countries in which we operate;

● projected capital expenditures and liquidity;

● changes in our strategy;

● litigation; and

● those factors referred to in "Item 3. Key Information – D. Risk Factors," "Item 4. Information on the Company," and "Item 5. Operating and Financial Review and Prospects", as well as in this annual report on Form 20-F generally.

Readers are urged to carefully review and consider the various disclosures made throughout this annual report on Form 20-F which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report on Form 20-F are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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 sources and other sources that we have not independently verified.

Unless otherwise indicated, all references to "Company," "we," "our" and "PolyPid" refer to PolyPid Ltd., its wholly owned subsidiaries, PolyPid Inc., a Delaware corporation with an office in New Jersey, and PolyPid Pharma SRL, a company organized and existing under the laws of Romania. References to "U.S. dollars" and "$" are to currency of the United States of America, and references to "shekel", "Israeli shekel" and "NIS" are to New Israeli Shekels. References to "Ordinary Shares" are to our Ordinary Shares, no par value. We report our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

PolyPid, BonyPid, Bacfenssi, Baczenssi, Opzifend, Ssisurg, Elyfssi and Bacyssio are our proprietary trademarks. These trademarks are important to our business. Although we have omitted the <sup>"®"</sup> and <sup>"TM"</sup> trademark designations for such marks in this annual report on Form 20-F, all rights to such trademarks and service marks are nevertheless reserved.

v

**Summary Risk Factors** 

The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 3D. of this annual report on Form 20-F and the other reports and documents filed by us with U.S. Securities and Exchange Commission, or the SEC.

***Risks Related to Regulatory Matters, Development and Clinical Testing of Product Candidates***

 ****

● Regulatory approval processes of foreign regulatory authorities are lengthy, time-consuming, costly and unpredictable, and if we are ultimately unable to obtain regulatory approval for D-PLEX<sub>100</sub> or any future product candidates, our business may fail.

● The regulatory approval for D-PLEX<sub>100</sub> or any future product candidate may be for a narrower indication than we seek or be subject to other limitations or restrictions that limit its commercial profile.

● Due to our limited resources and access to capital, we must prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.

● We depend on enrollment of patients in our clinical trials in order to continue development of our product candidates.

● Improvement in SoC infection prevention and control measures being undertaken in hospitals globally as a result of the COVID-19 pandemic may have decreased the rate of SSIs, which may adversely impact the ability of our clinical trials to demonstrate an improvement over the SoC and may ultimately reduce our commercial opportunity even if our trials are successful.

● PLEX is a novel technology, which makes it difficult to accurately and reliably predict the time and cost of development and of subsequently obtaining regulatory approval of D-PLEX<sub>100</sub> or any future PLEX product candidates, and we are heavily dependent on the success of D-PLEX<sub>100</sub>.

● We may be unable to successfully complete clinical development for any product candidates we may develop, including D-PLEX<sub>100</sub>.

***Risks Related to Commercialization of Our Product Candidates***

● If we are unable to enter into agreements with third parties to market and sell our product candidates or establish sales and marketing capabilities, we may be unable to generate any product revenue.

● Our dependence on collaboration agreements with third parties to market and sell our product candidates present a number of risks. If any of these risks should materialize, our business, financial condition and results of operations may be materially harmed.

● We have limited manufacturing experience and could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.

● Delays in establishing and obtaining regulatory approval of our manufacturing process and facility or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts.

● It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these products, or the procedures in which they are used, is limited by government authorities and/or third-party payor policies.

***Risks Related to Our Financial Condition and Capital Requirements***

● We have never generated revenues, have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

● We expect that we will need to raise substantial additional funding. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue our operations.

***Risks Related to Our Reliance on Third Parties***

● We rely on third parties to conduct certain elements of our preclinical studies, clinical trials and analytical tests, and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.

● We rely on third parties to manufacture the raw materials that we use to create our product candidates. Our business could be harmed if third parties fail to provide us with sufficient quantities of these materials and products or fail to do so at acceptable quality levels or prices.

● Our reliance on third parties requires us to share our trade secrets and intellectual property, which increases the possibility that a competitor will discover them or that our trade secrets and intellectual property will be misappropriated or disclosed.

vi

● If we are unable to obtain and maintain effective patent rights for our product candidates or any future product candidates, we may not be able to effectively protect our products and business and compete effectively in our markets.

● 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.

● We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

● Our future success depends in part on our ability to retain our senior management team and to attract, retain and motivate other qualified personnel.

● European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information. Failure to comply with such regulations may result in substantial fines, other administrative penalties and civil claims being brought against us.

● The market price of our Ordinary Shares may be highly volatile, and you may not be able to resell your Ordinary Shares at or above the price you paid.

● Our executive officers, directors and principal shareholders have the ability to exert significant control over matters submitted to our shareholders for approval.

● We may be or may become classified as a passive foreign investment company, which means that our U.S. shareholders may suffer adverse tax consequences as a result. If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.

● Our headquarters and other significant operations are located in Israel. Conditions in Israel, including implications of political, economic and military instability, may adversely affect our operations and results and may limit our ability raise additional funds.

● We received Israeli government grants for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received.

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

vii

**PART I**

**ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

Not applicable.

**ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE**

Not applicable.

**ITEM 3. KEY INFORMATION**

**A. Selected Financial Data.**

[Reserved]

**B. Capitalization and Indebtedness.**

Not applicable.

**C. Reasons for the Offer and Use of Proceeds.**

Not applicable.

**D. Risk Factors.**

Our business faces significant risks. You should carefully consider the risks described below, together with all of the other information in this annual report on Form 20-F. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer, and the price of our Ordinary Shares could decline. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings. See "Cautionary Note Regarding Forward-Looking Statements" above.

**Risks Related to Regulatory Matters, Development and Clinical Testing of Product Candidates**

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**We are heavily dependent on the success of D-PLEX<sub>100</sub>, including obtaining regulatory approval to market D-PLEX<sub>100</sub> in the United States and the EU.**

To date, we have invested all of our efforts and financial resources to: (i) research and develop our PLEX technology, our lead product candidate, D-PLEX<sub>100</sub>, and our preclinical and research and development programs, including conducting preclinical studies and clinical trials, and providing general and administrative support for these operations; (ii) develop and secure our intellectual property portfolio for D-PLEX<sub>100 </sub>and our PLEX technology and (iii) invest in our current manufacturing facility. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for and commercialize one or more of our current and future product candidates. Our product candidates' marketability is subject to significant risks, including:

● the sufficiency of the results from our SHIELD II Phase 3 clinical trial of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions to support approval of an NDA;

● acceptance by the FDA, EMA or other regulatory agencies of our strategies for seeking regulatory approvals for D-PLEX<sub>100</sub> and any future product candidates, including our proposed indications, primary and secondary endpoint assessments and measurements, safety evaluations and regulatory pathways;

● the acceptance by the FDA, EMA or other regulatory agencies of the number, design, size, conduct and implementation of our clinical trials, our trial protocols and the interpretation of data from preclinical studies or clinical trials;

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● the willingness of the FDA, EMA or other regulatory agencies to schedule an advisory committee meeting in a timely manner in connection with our regulatory submissions, if such advisory committee meetings are required;

● the recommendation of the FDA's advisory committee to approve our applications to market D-PLEX<sub>100</sub> and any future product candidates in the United States, and the EMA's approval to market D-PLEX<sub>100</sub> in the EU, if such advisory committee reviews are scheduled, without limiting the approved labeling, specifications, distribution or use of the products, or imposing other restrictions;

● the satisfaction of the FDA, EMA or other regulatory agencies with the safety and efficacy of D-PLEX<sub>100</sub> and any future product candidates;

● the prevalence and severity of adverse events associated with D-PLEX<sub>100</sub> and any future product candidates;

● the timely and satisfactory performance by third-party contractors, trial sites and principal investigators of their obligations in relation to our clinical trials;

● our success in educating medical professionals and patients about the benefits, administration and use of D-PLEX<sub>100</sub> and any future product candidates, if approved;

● our success in educating payers and hospital administrators about the potential cost savings benefits that D-PLEX<sub>100</sub> can deliver;

● the availability, perceived advantages, relative cost, safety and efficacy of alternative and competing treatments for the indications addressed by D-PLEX<sub>100 </sub>and any future product candidates;

● the effectiveness of our marketing, sales and distribution strategy, and operations, as well as that of any current and future licensees;

● our ability to scale, validate and maintain a commercially viable manufacturing process that is compliant with current good manufacturing practices, or cGMP-compliant;

● our ability to obtain, protect and enforce our intellectual property rights with respect to D-PLEX<sub>100</sub>, any future product candidates and our PLEX technology; and

● changes to regulatory guidelines.

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Many of these clinical, regulatory and commercial risks are beyond our control. Accordingly, we cannot assure you that we will be able to advance D-PLEX<sub>100</sub> and any future product candidates through clinical development, or to obtain regulatory approval of or commercialize any product candidates. If we fail to achieve these objectives or overcome the challenges presented above, we could experience significant delays or an inability to successfully commercialize D-PLEX<sub>100</sub> and any future product candidates. Accordingly, we may not be able to generate sufficient revenues through the sale of our product candidates to enable us to continue our business.

Additionally, approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.

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**Regulatory approval processes of the FDA, EMA and comparable foreign regulatory authorities are lengthy, time-consuming and unpredictable, and if we are ultimately unable to obtain regulatory approval for D-PLEX<sub>100</sub> or any future product candidates, our business may fail.**

The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting and export and import of drug products are subject to extensive regulation by the FDA, the EMA and by foreign regulatory authorities in other countries. These regulations differ from country to country. To gain approval to market D-PLEX<sub>100 </sub>and any future product candidates, we must provide data from well-controlled clinical trials that adequately demonstrate the safety and efficacy of the product for the intended indication to the satisfaction of the FDA, EMA or other regulatory authority. We have not yet obtained regulatory approval to market any product candidate in the United States or any other jurisdiction. The FDA, EMA or other regulatory agencies can delay, limit or deny approval of D-PLEX<sub>100</sub> or any future product candidate for many reasons, including:

● regulatory requests for additional analyses, reports, data, non-clinical and preclinical studies and clinical trials;

● our inability to demonstrate that a product candidate is safe and effective for the target indication to the satisfaction of the FDA, EMA or other regulatory agencies;

● the FDA's, EMA's, or other regulatory agencies' disagreement with our trial protocol, the interpretation of data from preclinical studies or clinical trials, or adequacy of the conduct and control of clinical trials;

● clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;

● the population studied in the clinical trial may not be sufficiently broad or representative to assess safety in the patient population for which we seek approval;

● unfavorable or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding safety or efficacy of a product candidate observed in clinical trials;

● our inability to demonstrate that clinical or other benefits of a product candidate outweighs any safety or other perceived risks;

● any determination that a clinical trial presents unacceptable health risks to subjects;

● our inability to obtain approval from institutional review boards, or IRBs, to conduct clinical trials at their respective sites;

● the FDA's determination that the 505(b)(2) regulatory pathway is not available for a product candidate;

● the non-approval of the formulation, labeling or the specifications of a product candidate;

● the failure to accept the manufacturing processes or facilities at our manufacturing facility or those of third-party manufacturers with which we contract;

● the potential for approval policies or regulations of the FDA, EMA or other regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval; or

● resistance to approval from the advisory committees of the FDA, EMA or other regulatory agencies for any reason including safety or efficacy concerns.

In the United States, we are required to submit an NDA to obtain FDA approval before marketing any product candidate. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate's safety and efficacy for each desired indication. In the case of an NDA covered by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or the FFDCA, we may rely in part on data not developed by us and for which we have not obtained a right of reference or use, including published scientific literature or the FDA's findings of safety and/or effectiveness for a previously approved drug. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product. The FDA may further inspect our manufacturing facilities to ensure that the facilities can manufacture any product candidate and any product, if and when approved, in compliance with the applicable regulatory requirements, as well as inspect our clinical trial sites to ensure that our trials are properly conducted. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA, or ultimately be approved. If the application is not accepted for review or approval, the FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will reconsider our application. If the FDA requires additional trials or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. Even if the FDA agrees that results from our SHIELD II trial evaluating D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions are sufficient to support the submission of an NDA, the FDA may determine that the data from this trial support a narrower indication than we may propose, if the FDA were to approve such NDA at all. In addition, the FDA may not consider any additional information to be complete or sufficient to support approval.

Regulatory authorities outside of the United States, such as in the EU, also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of a product candidate. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in a different jurisdiction. Approval processes vary among countries and can involve additional product candidate testing and validation and additional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time consuming. Foreign regulatory approval may include all of the risks associated with obtaining FDA approval. For all of these reasons, if we seek foreign regulatory approval for any product candidate, we may not obtain such approvals on a timely basis, if at all.

Even if we eventually complete clinical testing and receive approval of any regulatory filing for a product candidate, the FDA may grant approval contingent on the performance of costly and potentially time-consuming additional post-approval clinical trials or subject to contraindications, black box warnings, restrictive surveillance or Risk Evaluation and Mitigation Strategies, or REMS. Further, the FDA, EMA or other foreign regulatory authorities may also approve a product candidate for a more limited indication or a narrower patient population than we originally requested, and these regulatory authorities may not approve the labeling that we believe is necessary or desirable for the successful commercialization of any product candidate. Following any approval for commercial sale of a product candidate, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, as well as new safety information, will be subject to additional FDA notification, or review and approval. Also, regulatory approval for any product candidate may be withdrawn. To the extent we seek regulatory approval in foreign countries, we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining, or inability to obtain, applicable regulatory approval for D-PLEX<sub>100</sub> or any future product candidate would delay or prevent commercialization of such product candidate and would thus negatively impact our business, results of operations and prospects.

**If the FDA does not conclude that D-PLEX<sub>100 </sub>satisfies the requirements under Section 505(b)(2) of the FFDCA, or Section 505(b)(2), or if we are unable to utilize the hybrid application pathway in the EU, or if the requirements are not as we expect, the approval pathway for D-PLEX<sub>100 </sub>will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.**

We intend to utilize the FDA's Section 505(b)(2) regulatory pathway, and the hybrid application pathway in the EU, which is analogous to the Section 505(b)(2) pathway, to seek approval of D-PLEX<sub>100</sub>. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FFDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials or studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference or use from the person by or for whom the investigations were conducted, which we believe could expedite the development program for D-PLEX<sub>100</sub> by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval. However, while we believe that D-PLEX<sub>100 </sub>is a reformulation of an already-approved drug and, therefore, will be eligible for submission of an NDA under Section 505(b)(2), the FDA may disagree and determine that D-PLEX<sub>100</sub> is not eligible for review under such regulatory pathway.

If we are unable to pursue these regulatory pathways as anticipated, we may need to conduct additional preclinical experiments and clinical trials, provide additional data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for D-PLEX<sub>100</sub>, and complications and risks associated with D-PLEX<sub>100</sub>, would likely increase significantly. Moreover, inability to pursue the Section 505(b)(2) or similar regulatory pathway could result in new competitive products reaching the market more quickly than D-PLEX<sub>100</sub> or any future product candidates, which would likely harm our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) or similar regulatory pathway, D-PLEX<sub>100</sub> may not receive the requisite approvals for commercialization, and there is no guarantee the 505(b)(2) or similar pathway would ultimately lead to faster product development or earlier approval.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA's interpretation of Section 505(b)(2). If the FDA's interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is also not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

Moreover, even if D-PLEX<sub>100 </sub>or any future product candidates are approved under the Section 505(b)(2) pathway, as the case may be, the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

**Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize any of our product candidates, and the approval may be for a narrower indication than we seek or be subject to other limitations or restrictions that limit its commercial profile.**

We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our current or future product candidates meet safety and efficacy endpoints in pivotal clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. This may include approval of a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.

Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings or a REMS. These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of any of our product candidates. For example, the FDA may disagree that a Phase 3 trial evaluating D-PLEX<sub>100</sub> is sufficient to support either NDA submissions seeking approval for the specific indications under evaluation in our successful SHIELD II Phase 3 trial and potential future Phase 3 trials or NDA submissions seeking approval for broader indications covering the prevention of SSIs. Even if the FDA were to agree that these trials were sufficient to support one or more NDA submissions, the FDA may determine that the data from these trials support more narrow indications than we may propose, if the FDA were to approve such NDA submissions at all. If the FDA does not agree that our successful SHIELD II Phase 3 trial and potential future Phase 3 trials support the submission of an NDA for any indication, we will be required to conduct additional clinical trials to support our proposed indications. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates and materially and adversely affect our business, financial condition, results of operations and prospects.

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**Although D-PLEX<sub>100</sub> has been granted Qualified Infectious Disease Product designation by the FDA for the prevention of sternal wound infection after cardiac surgery, for the prevention of post-abdominal surgery incisional infection, and for prevention of post-colorectal SSIs, these designations do not guarantee a shorter FDA review process, or that D-PLEX<sub>100</sub> will ultimately be approved by the FDA for any indication.**

Under the Generating Antibiotic Incentives Now Act, or GAIN Act, the FDA may designate a product as a "qualified infectious disease product," or QIDP. In order to receive this designation, a drug must qualify as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called "qualifying pathogen" found on a list of potentially dangerous, drug-resistant organisms established and maintained by the FDA under the GAIN Act. A sponsor must request such designation before submitting a marketing application. We requested and received QIDP designations for D-PLEX<sub>100</sub> for the prevention of sternal wound infection after cardiac surgery, for the prevention of post-abdominal surgery incisional infection and for prevention of post-colorectal SSIs. We anticipate that the QIDP designations will provide, among other benefits, an overall increased level of communication with the FDA during the development process. The benefits of QIDP designation also include eligibility for priority review and an extension by an additional five years of any non-patent market exclusivity period awarded, such as a five-year exclusivity period awarded for a new molecular entity, or a three-year market exclusivity period awarded to an applicant whose application relies on new clinical investigations essential to the approval. This extension is in addition to any pediatric exclusivity extension that may be awarded. GAIN Act exclusivity may not be awarded if the indication for which we obtain approval does not meet the definition of a qualified infectious disease product. However, there is limited precedent for understanding the way in which the GAIN Act will be implemented. Receipt of QIDP designation in practice may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures, and does not assure ultimate approval by the FDA or related exclusivity benefits.

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**Fast Track Designation from the FDA may not actually lead to a faster development or regulatory review or approval process.**

We received Fast Track Designation from the FDA for D-PLEX<sub>100</sub> for topical use for the prevention of post-cardiac surgery sternal infection, for the prevention of post abdominal surgery incisional infection and for prevention of post-colorectal SSIs.

If a product candidate is intended for the treatment of a serious or life-threatening condition and the product candidate demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe one of our product candidates is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, such as the Fast Track Designation received for D-PLEX<sub>100</sub>, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

**Breakthrough therapy designation by the FDA may not lead to a faster development or regulatory review or approval process.**

We received a breakthrough therapy designation for D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing elective colorectal surgery. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the biologics license application, or BLA.

However, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification, or it may decide that the time period for FDA review or approval will not be shortened.

**Eligibility by EMA for submission of a MAA in the EU under the centralized procedure may not eventually lead to an approval for submission of a MAA under the centralized procedure nor a faster regulatory review or approval process.**

In September 2022, we received confirmation from the EMA, which was reconfirmed in December 2025, that D-PLEX<sub>100</sub> is eligible for submission of an application for an EU Marketing Authorisation (centralized Procedure) under Article 3(2)b – Therapeutic innovation (EC) No 726/2004. The centralized process eligibility is granted to D-PLEX<sub>100 </sub>under the Therapeutic Innovation criteria which underscores that D-PLEX<sub>100 </sub>potentially provides a new alternative to patients in preventing post abdominal SSIs.

However, the receipt of a confirmation from the EMA that D-PLEX<sub>100</sub> is eligible for submission of a MAA in the EU under the EMA's centralized procedure may not eventually result in an approval by the EMA that D-PLEX<sub>100</sub> is eligible for submission of a MAA in the EU under the Agency's centralized procedure nor result in a faster review or approval compared to product candidates considered for approval under conventional EMA national procedures and it would not assure ultimate approval by the EMA. In addition, even if D-PLEX<sub>100 </sub>is eligible for submission of a MAA in the under the Agency's centralized procedure, the EMA may later decide that the product candidate no longer meets the conditions for qualification.

**Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.**

Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular product candidates may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the pharmaceutical industry, in particular for our lead product candidate, our business, financial condition and results of operations could be materially adversely affected.

**We may not be successful in our efforts to identify, discover or license additional product candidates.**

Although a substantial amount of our effort is focused on continued clinical testing, potential approval and commercialization of D-PLEX<sub>100</sub>, the success of our business also depends upon our ability to identify, discover or license additional product candidates. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development for a number of reasons, including: lack of financial or personnel resources to acquire or discover additional product candidates; new product candidates may not succeed in preclinical or clinical testing, or may be shown to have harmful side effects or may have other characteristics that may make them unmarketable or unlikely to receive marketing approval; our competitors may develop alternatives that render our product candidates obsolete or less attractive; the market for a product candidate may change during our development program so that such product may become unprofitable to continue to develop; new product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and new product candidates may not be accepted as safe and effective by patients, the medical community, or third-party payors.

We may be forced to abandon our development efforts for a program or programs that are unsuccessful, or we may not be able to identify, license, or discover additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. Further, research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

**We depend on enrollment of patients in our clinical trials in order to continue development of our product candidates.**

We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. Patient enrollment is affected by many factors including the size and nature of the patient population, the eligibility criteria for the trial, the design of the clinical trial, the size of the patient population required for analysis of the trial's primary endpoints, the proximity of patients to study sites, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the number of enrolling clinical sites, our ability to obtain and maintain patient consents, the risk that patients enrolled in clinical trials will drop out of the trials before completion, and competing clinical trials (including other clinical trials that we will conduct in the future) and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, or competing drugs against the same target as well as any new drugs that may be approved for the indications we are investigating.

Additionally, we must compete for clinical sites, clinicians and the limited number of patients who fulfill the stringent requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, we do not know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical trials. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients. The delay or inability to meet planned patient enrollment may result in increased costs and delay or termination of our trials, which could have a harmful effect on our ability to develop products.

**Improvement in SoC infection prevention and control measures undertaken in hospitals globally as a result of the COVID-19 pandemic may have decreased the rate of SSIs, which may adversely impact the ability of our clinical trials to demonstrate an improvement over the SoC and may ultimately reduce our commercial opportunity even if our trials are successful.**

As a result of heightened awareness and attention to infection prevention and control within hospitals and in society at large as a result of the COVID-19 pandemic, the rate of SSIs may be declining relative to their historic rates. Any reduction in SSIs rates may decrease the likelihood of success for our product candidates to show an improvement over the SoC, and even if successful in clinical trials, a reduction in SSIs, even temporary, may decrease the perceived commercial need for our products if they are approved by regulatory authorities.

**Clinical drug development is difficult to design and implement and involves a lengthy and expensive process with uncertain outcomes.**

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. We do not know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:

● generate sufficient preclinical, toxicology, or other *in vivo* or *in vitro* data to support the initiation or continuation of clinical trials;

● obtain regulatory approval, or feedback on trial design, in order to commence a trial;

● identify, recruit and train suitable clinical investigators;

● reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among CROs and clinical trial sites, and have such CROs and sites effect the proper and timely conduct of our clinical trials;

● obtain and maintain IRB approval at each clinical trial site;

● identify, recruit and enroll suitable patients to participate in a trial;

● have a sufficient number of patients complete a trial or return for post-treatment follow-up;

● ensure clinical investigators and clinical trial sites observe trial protocol or continue to participate in a trial;

● address any patient safety concerns that arise during the course of a trial;

● address any conflicts with new or existing laws or regulations;

● add a sufficient number of clinical trial sites;

● manufacture sufficient quantities at the required quality of product candidate for use in clinical trials; or

● raise sufficient capital to fund a trial.

We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize any product candidate, including:

● we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;

● clinical trials of a product candidate may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs;

● the number of patients required for clinical trials of a product candidate may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

● our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

● regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or amend a trial protocol;

● we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and CROs;

● we or our investigators might have to suspend or terminate clinical trials of a product candidate for various reasons, including non-compliance with regulatory requirements, a finding that a product candidate have undesirable side effects or other unexpected characteristics, or a finding that the participants are being exposed to unacceptable health risks;

● the cost of clinical trials of a product candidate may be greater than we anticipate;

● the supply or quality of a product candidate or other materials necessary to conduct clinical trials of such product candidate may be insufficient or inadequate;

● there may be changes in government regulations or administrative actions;

● a product candidate may have undesirable adverse effects or other unexpected characteristics;

● we may not be able to demonstrate that a produce candidate's clinical and other benefits outweigh its safety risks;

● we may not be able to demonstrate that a product candidate provides an advantage over current standards of care of future competitive therapies in development;

● regulators may revise the requirements for approving a product candidate, or such requirements may not be as we anticipate; and

● any future collaborators that conduct clinical trials may face any of the above issues, and may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.

We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial's data safety monitoring board, by the FDA, EMA or other regulatory agencies. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or site by the FDA, EMA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Further, conducting clinical trials outside of the United States, as we have done and plan to expand for D-PLEX<sub>100</sub> and any future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in the countries outside of the United States to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

If we experience delays in completing any clinical trial of a product candidate or successfully obtaining regulatory approval, the commercial prospects of such product candidate may be harmed, and our ability to generate product revenues from such product candidate will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

**The results of earlier studies and trials may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates.** 

Results from preclinical studies or early-stage clinical trials are not necessarily predictive of future clinical trial results. Preclinical tests and Phase 1 and Phase 2 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules. Success in preclinical or animal studies and early clinical trials does not ensure that later, large-scale efficacy trials will be successful, nor does it predict final results. Our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies or after having successfully advanced through initial clinical trials.

There is a high failure rate for product candidates proceeding through clinical trials. Many companies in the pharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. Additionally, even if we are able to complete clinical trials, the results may not be sufficient to obtain regulatory approval for our product candidates.

**Interim, "top-line" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.**

From time to time, we may publicly disclose top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the top-line or preliminary data we previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our Ordinary Shares.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

**PLEX is a novel technology, which makes it difficult to accurately and reliably predict the time and cost of development and of subsequently obtaining regulatory approval of D-PLEX<sub>100 </sub>or any future PLEX product candidates.**

We have concentrated our efforts and product research on our PLEX drug delivery technology, and our future success depends on the successful development of this technology and products based on it. There can be no assurance that any development problems we experience in the future related to our product candidates will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may be unable to maintain and further develop sustainable, reproducible and scalable manufacturing processes, or transfer these processes to collaborators, which may prevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all. To our knowledge, no regulatory authority has granted approval to any person or entity, including us, to market and commercialize therapeutics using our novel delivery system. We may never receive approval to market and commercialize any product candidate that utilizes PLEX.

**As an organization, we may be unable to successfully complete clinical development for any product candidates we may develop, including D-PLEX<sub>100</sub>.**

We need to successfully complete pivotal clinical trials in order to obtain the approval of the FDA, EMA or other regulatory agencies to market D-PLEX<sub>100 </sub>or any future product candidates. Carrying out clinical trials and the submission of a successful NDA is a complicated process. As an organization, we have limited experience in conducting later stage or pivotal clinical trials and have limited experience in preparing, submitting and prosecuting regulatory filings. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to marketing approval of D-PLEX<sub>100</sub>. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing D-PLEX<sub>100</sub>. See "Risks Related to Our Reliance on Third Parties". We rely on third parties to conduct certain elements of our preclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.

**We may find it difficult to enroll patients in our clinical trials due to various reasons, which could delay or prevent us from proceeding with such trials.**

Identifying and qualifying patients to participate in our clinical trials is critical to our success. The timing of our clinical trials depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical trials if we encounter difficulties in enrollment. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, clinicians' and patients' perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any drugs that may be approved for the indications we are investigating, the eligibility criteria for the trials, our ability to obtain and maintain patient consents and the risk that patients enrolled in clinical trials will drop out of the trials before completion.

We may not be able to identify, recruit and enroll a sufficient number of patients to complete our clinical trials because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical trials, the proximity and availability of clinical trial sites for prospective patients and the patient referral practices of physicians. If patients are unwilling to participate in our trials for any reason, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products will be delayed.

**Our product candidates and the administration of our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any.**

Undesirable side effects, including toxicology, caused by D-PLEX<sub>100</sub> or any future product candidates, or the drugs encapsulated by such product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or other regulatory agencies. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our clinical studies could be suspended or terminated, and the FDA, EMA or other regulatory agencies could order us to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications. Moreover, during the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions.

Drug-related, drug-product related, formulation-related and administration-related side effects could affect patient recruitment, the ability of enrolled patients to complete the clinical trials or result in potential product liability claims, which could exceed our clinical trial insurance coverage. We do not currently have product liability insurance and do not anticipate obtaining product liability insurance until such time as we have received FDA, EMA or other comparable foreign authority marketing approval for one of our product candidates and such product is being provided to patients outside of clinical trials.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

● regulatory authorities may suspend or withdraw approvals of such product;

● regulatory authorities may require additional warnings on the label, such as a "black box" warning or contraindication;

● additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

● we may be required to create a REMS, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;

● we may be required to recall a product, change the way a product candidate is administered or conduct additional clinical trials;

● we could be sued and held liable for harm caused to patients;

● the product may become less competitive; and

● our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

**Even if we obtain regulatory approval for a product candidate, our products and business will remain subject to ongoing regulatory obligations and review.**

If our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including both federal and state requirements in the United States and comparable requirements outside of the United States. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, EMA or other regulatory agencies and to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved label. As such, we may not promote our products for indications or uses for which they do not have FDA, EMA or other regulatory agency approval. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our product candidates in general or in specific patient subsets. An unsuccessful post-marketing trial or failure to complete such a clinical trial could result in the withdrawal of marketing approval. Furthermore, any new legislation addressing drug safety issues could result in delays in product development or commercialization or increased costs to assure compliance. Foreign regulatory authorities impose similar requirements. If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

● issue warning letters asserting that we are in violation of the law;

● seek an injunction or impose civil or criminal penalties or monetary fines;

● suspend or withdraw regulatory approval;

● suspend any of our ongoing clinical trials;

● refuse to approve pending applications or supplements to approved applications submitted by us or our strategic partners;

● restrict the marketing or manufacturing of our products;

● seize or detain products, or require a product recall;

● refuse to permit the import or export of our product candidates; or

● refuse to allow us to enter into government contracts.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

The FDA's and other regulatory authorities' policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

**Disruptions at the FDA and other government agencies caused by funding shortages, reductions in force, changes in senior agency leadership, significant policy shifts, or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, cause uncertainty, lack of consistency and predictability or loss of confidence in agency capabilities and actions, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.**

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA's ability to hire and retain key personnel and accept the payment of user fees, significant changes in agency personnel including reductions in force or changes in senior agency leadership such as center directors, significant unanticipated changes in agency practices, policies and procedures and other events that may otherwise affect the FDA's ability to perform its regulatory functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. In addition, there have been sudden reductions in agency review personnel as well as sudden and recurring changes in senior agency leadership at the center director level. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs or modifications to approved drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, the U.S. government has threatened to shut down several times and in cases where it has certain regulatory agencies, such as the FDA, have had to consider furloughing critical FDA employees and stopping critical activities.

If a prolonged government shutdown occurs, changes in agency personnel and senior leadership continue or if global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

**We may be subject, directly or indirectly, to U.S. federal and state healthcare fraud and abuse laws, false claims laws, healthcare provider payment transparency laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.**

Our current and future operations may be directly or indirectly through our relationships with U.S. healthcare providers, patients and other persons and entities, subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business or financial arrangements and relationships through which we research, market, sell and distribute our products in the United States. While many of these fraud and abuse laws and payment transparency laws will not apply until our commercial release of a product, our pre-commercial financial relationships with healthcare providers and institutions may need to be re-evaluated prior to or at commercial launch. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

● The U.S. Anti-Kickback Statute, or the Anti-Kickback Statute, which prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other U.S. federal healthcare programs. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical and biotechnology manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Some arrangements may not strictly meet all requirements under an exception or safe harbor but may otherwise present a low risk of enforcement under the Anti-Kickback Statute. While we are not currently subject to the Anti-Kickback Statute because we do not yet have a commercial, reimbursable product, the relationships that we form now could in the future implicate the Anti-Kickback Statute upon attainment of coverage and reimbursement for approved products under any federal healthcare program. We therefore train and educate our personnel on the Anti-Kickback Statute and their obligations thereunder, and we endeavor to structure our financial relationships to comply with the applicable exceptions and safe harbors wherever possible. However, some of our arrangements, like many other common and non-abusive arrangements, are not covered by an applicable exception or safe harbor and therefore, could implicate the Anti-Kickback Statute in the future. Nevertheless, we do not believe them to present a significant risk to beneficiaries or federal healthcare programs and, as such, appear unlikely to invite future government scrutiny or prosecution, warrant the imposition of sanctions, or be found to violate the statute. However, we cannot offer assurance that the government or a whistleblower would agree with our position that certain arrangements fall within a safe harbor, or that arrangements that do not squarely meet an exception or safe harbor will not be found to violate the Anti-Kickback Statute. Violations of the Anti-Kickback Statute can also trigger liability under the federal Civil Monetary Penalty Law and federal civil False Claims Act, or FCA, thereby increasing the penalty structure for these violations.

● The U.S. federal false claims laws, including the FCA, and civil monetary penalties laws, which prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the U.S. federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the U.S. federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government third-party payors if they are deemed to "cause" the submission of false or fraudulent claims. Causing the submission of a false claim can be triggered through improper financial relationships that violate the Anti-Kickback Statute, erroneous billing or coding guidance provided to healthcare providers, or improper marketing practices or activities that do not comport with FDA approvals or indications, among other things. The FCA also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. Whistleblower, or qui tam, actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, even before the validity of the claim is established and even if the government decides not to intervene in the lawsuit. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties per false claim or statement. Companies may decide to agree to large settlements with the government and/or whistleblowers to avoid the cost, distraction and negative publicity associated with litigation. Government enforcement agencies and private whistleblowers have investigated pharmaceutical and biotechnology companies for or asserted liability under the FCA for a variety of alleged promotional, marketing and other activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for "off-label" uses; and submitting inflated best price information to the Medicaid Rebate Program. In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, amended federal law to provide that a claim for items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil FCA. Criminal prosecution is also possible under the Criminal False Claims Act for knowingly making or presenting a false or fictitious or fraudulent claim to the federal government.

● Many U.S. states have also enacted their own laws intended to protect against fraud and abuse in the health care industry and more broadly. These laws may have similar prohibitions and restrictions as the Anti-Kickback Statute or False Claims Act but apply to all payors. In some cases, these laws prohibit or regulate additional conduct beyond that covered under federal law. Penalties for violating these laws can range from fines to criminal sanctions.

● The U.S. federal Civil Monetary Penalties Law, or CMPL, authorizes the imposition of substantial civil money penalties against an entity that engages in certain prohibited activities including but not limited to violations of the Anti-Kickback Statute, knowing submission of a false or fraudulent claim, employment of an individual excluded from participation in federal healthcare programs, and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier from which to receive items or services for which payment may be made in whole or part by a federal healthcare program. Remuneration is broadly defined under the CMPL as any transfer of value, including provision of items or services for free or below fair market value. It covers direct or indirect transfers like discounts, free goods, co-pay waivers, or even "nominal" incentives, though exceptions exist for offerings that meet the Financial Need, Preventative Care, or Promoting Access to Care exceptions. Sanctions for violations of the CMPL include civil monetary penalties and administrative penalties up to and including exclusion from participation in federal health care programs.

● The U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

● The Physician Payments Sunshine Act, enacted as part of the ACA, imposes, among other things, annual reporting requirements for covered manufacturers for certain payments and "transfers of value" provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the recipients described above and their immediate family members. While we are not currently subject to such reporting, we will be upon commercial product release where payment is available under federal healthcare programs.

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations also established standards to protect individuals' medical records and other individually identifiable health information (collectively defined as "protected health information"). HIPAA requires covered entities, including health plans, healthcare clearinghouses and most health care providers, to implement administrative, physical and technical safeguards to protect the privacy and security of protected health information, and sets limits and conditions on the uses and disclosures that may be made of such information without the authorization of the relevant individual. HIPAA's Security Rule and certain provisions of the HIPAA Privacy Rule and Breach Notification Rule apply to business associates of covered entities (i.e., entities that provide services to covered entities that may require access to or use of protected health information on behalf of covered entities), and business associates are subject to direct liability for violation of these rules. Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay and notification must also be made to the U.S. Department of Health & Human Services, Office for Civil Rights, or the OCR, and, in certain situations involving large breaches, to the media. The OCR enforces the HIPAA Rules and performs compliance audits and investigations. In addition to enforcement by OCR, HIPAA authorizes state attorneys general to bring civil actions seeking either injunction or damages in response to HIPAA violations that impact state residents. We do not meet the definition of a covered entity under HIPAA; however, we may be considered a business associate with respect to certain interactions and relationships with our health care customers.

● In addition, numerous other laws, regulations and legislative and regulatory initiatives at the U.S. federal and state levels address the privacy and security of personal information. We remain subject to federal and state privacy-related laws that may be more restrictive or contain different requirements than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the Federal Trade Commission, or FTC, uses its consumer protection authority to initiate enforcement actions against companies relating to their use and disclosure of personally identifiable information that is considered to be unfair or deceptive. Specifically, FTC has asserted authority and issued enforcement actions in response to actual or perceived unfair or deceptive practices by a company in the handling of consumer information. The FTC has also pursued enforcement actions against companies for violations of its Health Breach Notification Rule and the Children's Online Privacy Protection Act. Our use of personal information is also subject to our published privacy policies and notices.

● In addition, state laws, which are continually evolving, govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. These laws include, for example, the California Consumer Privacy Act, or CCPA, which came into effect January 1, 2020 and was amended and expanded by the California Privacy Rights Act, or CPRA, which came into effect on January 1, 2023; the Virginia Consumer Data Protection Act, effective as of January 1, 2023; the Colorado Privacy Act and the Connecticut Data Privacy Act, both effective as of July 1, 2023; the Utah Consumer Privacy Act, effective as of December 31, 2023; the Washington My Health My Data Act and Nevada Senate Bill 370, both effective as of March 31, 2024; the Oregon Consumer Privacy Act, the Texas Data Privacy and Security Act, and the Florida Digital Bill of Rights, all effective as of July 1, 2024; the Montana Consumer Data Privacy Act, effective as of October 1, 2024; the Delaware Personal Data Privacy Act, effective as of January 1, 2025; the Iowa Act Relating to Consumer Data Protection, effective as of January 1, 2025; the New Jersey Data Protection Act, effective as of January 15, 2025; the Tennessee Information Protection Act, effective as of July 1, 2025; the Minnesota Consumer Data Privacy Act, effective July 31, 2025; and the Indiana Consumer Data Protection Act, effective as of January 1, 2026. Several other states have enacted, or are proposing to enact, their own comprehensive privacy laws. Among other things, these state-specific laws create new data privacy obligations for covered companies and provide new privacy rights to state residents, including the right to opt out of certain disclosures of their information. A particular focus of legislatures appears to be consumer health data which is not subject to HIPAA, as evidenced by passage of the Washington My Health My Data Act and Nevada Senate Bill 370. The CCPA also created a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach, and other laws, such as the Telephone Consumer Protection Act and the Washington My Health My Data Act, also have private rights of action for violations. Regulations implementing the California and Colorado laws have been published, but many questions remain as to how all of the new statutes will be interpreted and enforced. The effects of state data protection laws are significant and may require us to modify our data processing practices. They may also cause us to incur substantial costs and expenses to ensure ongoing compliance. Various U.S. state laws and regulations may also require us to notify affected individuals and state agencies in the event of a data breach involving individually identifiable information. We may see more stringent state and federal privacy legislation passed in 2026 and beyond, as the increased cyber-attacks during recent international conflicts have once again put a spotlight on data privacy and security in the United States and other jurisdictions. We cannot predict where new legislation might arise, the scope of such legislation, or the potential impact to our business and operations.

● The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits U.S. corporations and their representatives from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA would include interactions with certain healthcare professionals in many countries, either directly or through distributors. On February 10, 2025, the Trump Administration issued an executive order, "Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security" pausing FCPA enforcement for a period of 180 days while new guidelines were developed that prioritized American economic competitiveness and efficiency of government resources; however, on June 9, 2025, the Deputy Attorney General issued a memorandum pursuant to the executive order's directive, titled "Guidelines for Investigations and Enforcement of the Foreign Corrupt Practices Act (FCPA)", which detailed the administration's new FCPA guidelines for current and future investigations and enforcement priorities. Then on August 11, 2025, the U.S. Department of Justice unsealed its first FCPA indictment since the pause in FCPA enforcement. The indictment described conduct similar to matters previously pursued under the FCPA prior to the executive pause order; however, certain elements of the conduct and the allegations aligned with the policy goals expressed in the updated guidelines. Therefore, the FCPA remains applicable to our operations and we continue to expend resources to ensure that our activities comply. Our present and future business has been and will continue to be subject to various other U.S. and foreign laws, rules and/or regulations.

● International sales of products are subject to foreign government regulations, which may vary substantially from country to country. The time required to obtain approval in a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ. There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries, though differences remain.

● International sales of products are subject to foreign government regulations, which may vary substantially from country to country. The time required to obtain approval in a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ. There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries, though differences remain.

● Outside the United States a range of anti-bribery and anti-corruption laws, as well and some industry-specific laws and codes of conduct, apply to the drug and medical device industry and interactions with government officials and entities and healthcare professionals. Laws include the UK Bribery Act of 2010. Further, the EU member countries have emphasized a greater focus on healthcare fraud and abuse and have indicated greater attention to the industry by the European Anti-Fraud Office. Countries in Asia have also become more active in their enforcement of anti-bribery laws and with respect to procurement and supply chain fraud.

● In the European Union, increasingly stringent data protection and privacy rules that have and will continue to have substantial impact on the use of patient data across the healthcare industry became effective in May 2018. The EU General Data Protection Regulation, or GDPR, applies across the European Union and includes, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and significant fines for non-compliance. The GDPR fine framework can be up to 20 million euros, or up to 4% of the company's total global turnover of the preceding fiscal year, whichever is higher. The GDPR also requires companies processing personal data of individuals residing in the European Union to comply with EU privacy and data protection rules, even if the company itself does not have a physical presence in the European Union. Noncompliance could result in the imposition of fines, penalties, or orders to stop noncompliant activities. Due to the strong consumer protection aspects of the GDPR, companies subject to its purview are allocating substantial legal costs to the development of necessary policies and procedures and overall compliance efforts. We expect continued costs associated with maintaining compliance with GDPR into the future. For example, on July 16, 2020, the Court of Justice of the European Union issued a judgment in Case C-311/18 that declared the EU-U.S. Privacy Shield Framework invalid (Data Protection Commissioner v Facebook Ireland Ltd and Maximillian Schrems, also knowns as Schrems II). In the absence of the new adequacy decision, this judgment still results in additional compliance obligations for companies that rely on mechanisms other than the Privacy Shield, like standard contractual clauses and appropriate supplementary measures to ensure a valid basis for the transfer of personal data outside of Europe. Though a new adequacy decision (the EU-U.S. Data Privacy Framework) has been adopted, and it may also be subject to challenges similar to those faced by the Privacy Shield. In view of this and other developments, data transfer risk remains a potential issue that requires regular monitoring. We expect continued costs associated with maintaining compliance with the GDPR into the future, and these requirements, as interpreted by EU data protection authorities, could negatively impact our business, financial condition and results of operations.

Many states have analogous state laws and regulations that may apply to our business practices, including but not limited to, research, distribution, sales or marketing arrangements. In addition, certain states require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government. Certain states and local jurisdictions require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and register pharmaceutical sales representatives. Additionally, certain states also require pharmaceutical companies to file reports relating to pricing information or marketing expenditures and have laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. The need to build and maintain a robust compliance program with different compliance and/or reporting requirements increases the possibility that a company may violate one or more of the requirements, resulting in fines and penalties.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, including certain states with a broader reach than their federal counterparts, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly, particularly following a commercial product launch. It is possible that governmental authorities will conclude that our business practices, including arrangements we may have with healthcare institutions and facilities, physicians and other healthcare providers, some of whom may receive stock options as compensation for services provided, do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government funded healthcare programs.

**Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market and distribute our products after clearance or approval is obtained.**

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

● changes to manufacturing methods, facilities, and locations;

● change in protocol design;

● additional treatment arm (control);

● recall, replacement, or discontinuance of one or more of our products;

● labeling, promotion, and advertising of our products; and

● additional recordkeeping and reporting.

In addition, in the United States, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. The pharmaceutical industry in the United States, as an example, has been affected by the passage of the ACA, which, among other things, imposed new fees on entities that manufacture or import certain branded prescription drugs and expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future, particularly with the change in presidential administration.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes include, among others, aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect until 2032 unless additional Congressional action is taken.

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act, or the OBBBA, a budget reconciliation bill that includes significant funding cuts to Medicaid, the Health Insurance Marketplaces, and the Medicare Physician Fee Schedule. The Congressional Budget Office estimates the OBBBA will reduce federal healthcare spending and lead to a 10 million increase in the U.S. uninsured population, all of which could lead to increased pricing controls and affect product demand.

Further, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. President Biden issued several executive orders, Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

In July 2021, the Biden administration released an executive order, "Promoting Competition in the American Economy," with multiple provisions aimed at prescription drugs. In response to President Biden's executive order, on September 9, 2021, the Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. Further, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions took effect in fiscal year 2023, with subsequent updates to include additional drugs.

On January 17, 2025, just prior to the change in presidential administration, the HHS announced 15 additional drugs selected for Medicare drug price negotiations under the IRA. However, the Trump administration rescinded the Biden Executive Order 14807 – "Lowering Prescription Drug Costs for Americans", which instructed Medicare to explore ways to reduce drug costs, including a potential $2 monthly out of pocket, or OOP, cap on certain generic medications. President Trump also revoked an executive order that had directed the Center for Medicare and Medicaid Innovation to develop 3 experimental drug pricing models. Despite these actions, however, President Trump is similarly focused on reducing the costs of prescription drugs in the United States. On May 12, 2025, the Trump Administration issued an Executive Order titled "Delivering Most-Favored Nation Prescription Drug Pricing to American Patients", outlining a plan to reduce prescription drug costs in the U.S., which was followed by formal letters to major pharmaceutical companies in July 2025 outlining steps they must take to lower prescription drug costs to American patients and taxpayers. In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products, including our product candidates. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Our results of operations could be adversely affected by the ACA and by other health care reforms that may be enacted or adopted in the future.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and in some cases, designed to encourage importation from other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida's Section 804 Importation Program, or SIP, proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs.

The full impact on our business of the ACA, the Medicare payment reductions, Medicaid funding, drug pricing controls, and other new laws is uncertain. Nor is it clear whether other legislative changes will be adopted, if any, or how such changes would affect the demand for our product candidates. Future actions by the Trump Administration and the U.S. Congress could have a material adverse impact on our results of operations or financial condition. We cannot predict what additional new legislation, agency priorities, and rulemaking may be on the horizon as the U.S. continues to reassess how it pays for healthcare. As a result, we cannot quantify or predict what impact any changes might have on our product candidates.

Other legal, regulatory and commercial policy influences are subjecting our industry to significant changes, and we cannot predict what new regulations or policies will emerge from U.S. federal or state governments, international governments, or third-party payors. Government and commercial payors may, in the future, consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect reimbursement for healthcare products such as our product candidates. These policies have included, and may in the future include: basing reimbursement policies and rates on clinical outcomes, the comparative effectiveness, and costs, of different treatment technologies and modalities; imposing price controls and taxes on manufacturers; and other measures. Future significant changes in the healthcare systems in the United States or elsewhere could also have a negative impact on the demand for our current and future products.

**We face intense competition in an environment of rapid technological change and the possibility that our competitors may develop products and drug delivery systems that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize our product candidates.**

The pharmaceutical industry in which we operate is intensely competitive and subject to rapid and significant technological change. We are currently aware of various existing therapies in the market and in development that may in the future compete with our product candidates, including other therapies that address the management of SSIs, as well as other drug delivery mechanisms that utilize polymer and/or lipid technology to deliver APIs at the local level. Other approaches may also emerge for the prevention or treatment of any of the indications on which we focus, and new technologies may emerge in localized drug delivery.

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies and specialty pharmaceutical companies. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors. See "Item 4. B. — Business Overview — Competition."

**Even if we obtain and maintain approval for D-PLEX<sub>100</sub> or our other product candidates from the FDA, we may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.**

Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain approval from the FDA or other regulatory authorities may negatively impact our ability to obtain approval in other foreign countries. Sales of D-PLEX<sub>100</sub> or our other product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our product candidates, if approved, is also subject to approval.

We intend to submit a marketing authorization application to the EMA for approval of D-PLEX<sub>100</sub> in the EU, but obtaining such approval from the European Commission following the opinion of the EMA is a lengthy and expensive process. Even if a product candidate is approved, the applicable regulatory agency may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the EU also have requirements for approval of product candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries.

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for a product candidate may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of D-PLEX<sub>100</sub> or our other product candidates will be harmed and our business, financial condition, results of operations and prospects will be adversely affected.

**The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.**

Prescription drugs may be promoted only for the approved indications in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. If the FDA does not agree that our data support the submission of an NDA seeking approval for the prevention of SSIs, we will train our marketing and sales personnel to not promote our products, if approved, for any off label uses. We cannot, however, prevent a physician from using our products off-label, when in the physician's independent professional medical judgment, he or she deems it appropriate. For example, if we obtain approval of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal surgery, physicians may nevertheless decide to use D-PLEX<sub>100</sub> in an attempt to prevent infections in connection with other types of surgeries, and there may be increased risk of injury to patients if physicians attempt to use our products for these uses for which they are not approved. While the FDA does not regulate the behavior of physicians in their choice of treatments, the FDA does restrict manufacturer's communications on the subject of off-label use of their products. Furthermore, the use of our products for indications other than those approved by the FDA, or any foreign regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

If the FDA, EMA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

**Risks Related to Commercialization of Our Product Candidates** 

**We currently have no marketing and sales organization. If we are unable to enter into agreements with third parties to market and sell our product candidates or establish sales and marketing capabilities, we may be unable to generate any product revenue.**

We have no experience selling and marketing our product candidates, and we currently have no marketing or sales organization. To successfully commercialize any product candidates that may result from our development programs, we will need to develop these capabilities, either on our own or with others. Our primary strategy, assuming that our product candidates receive regulatory approval, is to utilize experienced third parties with technical expertise and support distribution and marketing capabilities to commercialize our product candidates in major markets. Alternatively, we will establish a sales and marketing organization independently, all of which will be expensive, difficult and time-consuming. Any failure or delay in entering into agreements with third parties to market and sell our product candidates or alternatively, in the development of our internal sales, marketing and distribution capabilities would adversely impact our ability to commercialize our product candidates and we may be unable to generate sufficient product revenue to sustain our business.

We may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. Further, given our lack of prior experience in marketing and selling pharmaceutical products, our initial estimate of the size of the required sales force may be materially more or less than the size of the sales force actually required to effectively commercialize our product candidates. As such, we may be required to hire sales representatives and third-party distributors to adequately support the commercialization of our product candidates, or we may incur excess costs if we hire more sales representatives than necessary. We may compete with companies that currently have extensive and well-funded marketing and sales operations. Without the support of a third party or an internal team to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

Our efforts to educate the medical community, including physicians, hospital pharmacists, hospital administrators, and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. If any of our product candidates are approved but fail to achieve market acceptance among physicians, hospital pharmacists, hospital administrators, patients or third-party payors, we will not be able to generate significant revenues from such product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

**Our dependence on collaboration agreements with third parties to market and sell our product candidates presents number of risks.**

The risks that we face in connection with our existing collaboration with ADVANZ PHARMA Corp., or Advanz, as well as those that we may enter into in the future include, among others, the following:

● we may be unable to reach mutually agreeable terms and conditions with respect to potential new collaborations;

● we or our current and/or future collaborators may be unable to comply or fully comply with the obligations under collaboration agreements to which we are (or will become) a party, and as a result, we may not generate milestone payments or royalties from such agreements, and our ability to enter into additional agreements may be harmed;

● collaborators generally have significant discretion in electing whether to pursue any of the planned activities and the manner in which it will be done, including the amount and nature of the resources to be devoted to the development and commercialization of our product candidates;

● if our current and/or future collaborators breach or terminate an agreement with us, the commercialization of our product candidates could be adversely affected as we may not have sufficient financial or other resources or capabilities to successfully commercialize these product candidates on our own or find other partners or enforce our rights under breached or terminated agreement;

● our current and/or future collaborators may require us changing or adopting the trial design to fit their business priorities, standards and other objectives;

● changes in a collaborator's business strategy may negatively affect its willingness or ability to complete its obligations under its arrangement or to continue with its collaboration with us;

● our current and/or future collaborators may terminate the program or the agreement and then compete against us in the development or commercialization of similar product candidates;

● disagreements between us and our current and/or future collaborators may lead to delays in, or termination of, the collaboration; or

● our current and/or future collaborators may be acquired by, acquire, or merge with, another company, and the resulting entity may have different priorities or competitive products. If any of these risks should materialize, our business, financial condition and results of operations may be materially harmed.

**We have limited manufacturing experience and could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.**

We have limited experience manufacturing D-PLEX<sub>100</sub>. Although we have established our own manufacturing facility to support current and future clinical trials, and have received regulatory approvals for clinical manufacturing, and an initial commercial launch, we may be unable to produce commercial materials or meet demand for D-PLEX<sub>100</sub> if we are unable to receive or maintain commercial regulatory approvals for our facility. Any such failure could delay or prevent our development of D-PLEX<sub>100</sub> and would have a material adverse effect on our business, financial condition and results of operations.

Although we have increased the scale of our manufacturing process in order to produce sufficient quantities of D-PLEX<sub>100</sub> for our planned clinical trials and at least the first 48 months following a commercial launch, if D-PLEX<sub>100</sub> is approved, in the future we may need to increase the scale or capacity of our manufacturing process either at our facility or at third-party manufacturers, or both. We may not be successful in increasing the scale or capacity of our manufacturing process or producing sufficient quantities of D-PLEX<sub>100</sub>, due to several factors, including equipment malfunctions, facility contamination, technical process challenges, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical- and commercial-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. There is no assurance we will not experience such failures at our own manufacturing facility or that of a third party in the future. Lot failures or product recalls could cause delays in product supply or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

We also may encounter problems hiring and retaining the experienced specialist scientific, quality assurance, quality control and manufacturing personnel needed to operate our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

Any problems in our manufacturing process or facilities could make us a less attractive collaborator for potential partners, including biopharmaceutical companies, which could limit our access to additional attractive development programs.

**We are subject to significant regulatory oversight with respect to manufacturing our product candidates. Delays in establishing and obtaining regulatory approval of our manufacturing process and facility or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts.**

The preparation of drug products for clinical trials or commercial sale is subject to extensive regulation. Before we can begin to commercially manufacture D-PLEX<sub>100 </sub>or any product candidate, whether in a third-party facility or in our own facility, we must obtain regulatory approvals from the Israeli Ministry of Health, or MOH, the FDA and similar regulatory agencies, as applicable for our manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriate regulatory authorities in the EU and worldwide. In addition, we must pass a pre-approval inspection of our manufacturing facility by the FDA before D-PLEX<sub>100,</sub> or any product candidate can obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. For example, in the past, a cGMP audit by the MOH of the manufacturing process in the facility of our contract manufacturer for D-PLEX<sub>100</sub> resulted in certain critical observations, which have since been resolved. There can be no guarantee, however, that future inspections by regulatory authorities of our manufacturing facilities or those of our contract manufacturers will result in MOH's agreement that these critical observations have been resolved or that similar inspectional observations will not be identified. If we do not demonstrate to the satisfaction of the applicable regulator that our manufacturing facilities, or those of our contract manufacturers, are in compliance with applicable requirements, we may be materially delayed in the development of our product candidates, which would materially harm our business. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any product candidate that we may develop.

Our failure to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of any approved products and our product candidates.

Operating our own manufacturing facility will require additional investment, will be time-consuming and may be subject to delays, including because of shortage of labor or compliance with regulatory requirements. In addition, operating a manufacturing facility may cost more than we currently anticipate. Delays or problems in the build out of our manufacturing facility may adversely impact our ability to provide supply for the development and commercialization of D-PLEX<sub>100</sub> as well as our financial condition.

**If we receive marketing approval for our product candidates, sales will be limited unless the product achieves broad market acceptance by physicians, hospital administrators, third-party payors, hospital pharmacists, infectious disease specialists and others in the medical community.**

The commercial success of our product candidates will depend upon the acceptance of the product by the medical community, including physicians, hospital administrators, healthcare third-party payors, hospital pharmacists, infectious disease specialists and patients. The degree of market acceptance of any approved product will depend on a number of factors, including:

● the demonstration of clinical safety and efficacy of our product candidates in clinical trials;

● the efficacy, potential and perceived advantages of our product candidates over alternative treatments;

● the cost of treatment relative to the cost of treating SSIs;

● the prevalence and severity of any adverse side effects;

● the prevalence and severity of the disease the product is designed to treat or prevent;

● product labeling or product insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in a product's approved labeling;

● distribution and use restrictions imposed by the FDA or agreed to by us as part of a mandatory or voluntary risk management plan;

● our ability to obtain adequate reimbursement;

● the demonstration of the effectiveness of our product candidates in reducing the cost of treatment;

● the strength of marketing and distribution support;

● the timing of market introduction of competitive products;

● the availability of products and their ability to meet market demand; and

● publicity concerning our product candidates or competing products and treatments.

If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, hospital administrators, third-party payors, hospital pharmacists, infectious disease specialists and patients, we may not generate sufficient revenue from the product, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

**It may be difficult for us to profitably sell our product candidates if reimbursement for these products, or the procedures in which they are used, is limited by government authorities and/or third-party payor policies.**

In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of our product candidates, if approved, will depend on, in part, the extent to which the procedures utilizing our product candidates, performed by health care providers, will be covered by third-party payors, such as government health care programs, commercial insurance and managed care organizations. Our product candidates will be purchased or provided by health care providers for utilization in certain surgical procedures. In the event health care providers and patients accept our product candidates as medically useful, cost effective and safe, there is uncertainty regarding whether our product candidates will be directly reimbursed, reimbursed through a bundled payment or if the product candidates will be included in another type of value-based reimbursement program. Third-party payors determine the extent to which new products or procedures will be covered as a benefit under their plans and the level of reimbursement for any covered product or procedure which may utilize a covered product.

When used in connection with surgical and certain other procedures, our product candidates may not be reimbursed separately but their cost may instead be bundled as part of the payment received by the provider for the procedure. Treating physicians are unlikely to use and order our products unless coverage is provided, and the reimbursement is adequate to cover all or a significant portion of the cost of the procedures which utilize our products. A decision by a third-party payor not to cover or adequately reimburse for our product candidates or procedures using our product candidates, could reduce physician utilization of our products once approved. Therefore, coverage and adequate reimbursement for procedures which utilize new products is critical to the acceptance of such new products.

A primary trend in the United States healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Third-party payors decide which products and procedures they will pay for and establish reimbursement and co-payment levels. Government and other third-party payors are increasingly challenging the prices charged for health care products and procedures, examining the cost effectiveness of procedures, and the products used in such procedures, in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement. We cannot be sure that coverage will be available for our product candidates, if approved, or, if coverage is available, the level of direct or indirect reimbursement.

We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor's determination that use of a product is:

● a covered benefit or part of a covered benefit under its health plan;

● safe, effective and medically necessary;

● appropriate for the specific patient;

● cost-effective; and

● neither experimental nor investigational.

In the United States, third-party payors, including private and governmental payors such as the Medicare and Medicaid programs, play an important role in determining the extent to which procedures using new products will be covered and reimbursed. The Medicare and Medicaid programs are increasingly used as models for how private payors and other governmental payors develop their coverage and reimbursement policies. It is difficult to predict at this time what third-party payors will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. Additionally, we may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidates, or achieve profitably at all, even if approved.

**Our business entails a significant risk of clinical trial and/or product liability and our ability to obtain sufficient insurance coverage could have a material effect on our business, financial condition, results of operations or prospects.**

Our business exposes us to significant clinical trial and/or product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Clinical trial and/or product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, product liability claims could result in an FDA investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management's time and our resources, substantial monetary awards to trial participants or patients and a decline in our company valuation. While we currently have clinical trial liability insurance, we do not have product liability insurance and do not anticipate obtaining product liability insurance until such time as we have received FDA or other comparable foreign authority approval for a product and there is a product that is being provided to patients outside of clinical trials. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. In some countries, the institution or the doctors involved do not have sufficient insurance to cover their activities. Furthermore, clinical trial and product liability insurance are becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by clinical trial and product liability claims that could have a material adverse effect on our business.

**Risks Related to Our Financial Condition and Capital Requirements** 

**We have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.**

We are a biopharmaceutical company. We have incurred operating losses each year since our inception, including operating losses of $33.0 million and $28.0 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $301.5 million. We have devoted substantially all of our financial resources to designing and developing our PLEX product candidates, including conducting clinical trials and preclinical studies and providing general and administrative support for these operations. We expect that we will continue to incur expenses and operating losses for the foreseeable future as we continue clinical development of D-PLEX<sub>100</sub> for the prevention of SSIs and develop other product candidates using our PLEX technology. Our ability to ultimately achieve revenues and profitability is dependent upon our ability to successfully complete the development of D-PLEX<sub>100</sub> and any future product candidates, obtain necessary regulatory approvals for and successfully manufacture, market and commercialize our products.

We anticipate that we will continue to incur expenses based on a number of factors, including to the extent that we:

● continue our clinical development of D-PLEX<sub>100</sub>;

● seek regulatory and marketing approvals for any product candidates that successfully complete clinical trials;

● build the necessary commercial, marketing and medical infrastructure in the United States to successfully launch any products;

● advance our preclinical and research and development programs, including, without limitation, our OncoPLEX program;

● identify, assess, acquire, license and/or develop other product candidates;

● manufacture under cGMP, which is material for clinical trials or potential commercial sales, either at our manufacturing facility or through third-party contract manufacturers;

● establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

● hire personnel and invest in additional infrastructure to support our operations and expand our product development;

● enter into agreements to license intellectual property from third parties;

● develop, maintain, protect and expand our intellectual property portfolio; and

● experience any delays or encounter issues with respect to any of the above, including, but not limited to, failed trials, complex results, safety issues or other regulatory challenges that require longer follow-up of existing clinical trials, additional major clinical trials or additional supportive studies in order to pursue marketing approval.

To date, we have financed our operations primarily through the sale of equity securities, loan facilities, royalty-bearing and non-royalty bearing grants that we received from the Israeli Innovation Authority, or the IIA, and non-royalty bearing grants under the European Commission's Seventh Framework Program for Research, or the FP7. The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations or grants. Even if we obtain regulatory approval to market one or more product candidates, our future revenue will depend upon the size of any markets in which such product candidates receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors for such product candidates. Further, the operating losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.

**We have never generated any revenue from product sales and may never be profitable.**

We have no products approved for marketing in any jurisdiction and we have never generated any revenue from product sales. Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, D-PLEX<sub>100</sub> or any future product candidates. We do not anticipate generating revenue from product sales for the foreseeable future. Our ability to generate future revenue from product sales will depend heavily on our ability to:

● complete research and preclinical and clinical development of D-PLEX<sub>100</sub> and any future product candidates in a timely and successful manner;

● obtain regulatory and marketing approval for any product candidates for which we complete clinical trials, including, without limitation, with respect to safety and efficacy data;

● maintain and enhance a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for D-PLEX<sub>100</sub> and any future product candidates that is compliant with cGMP;

● establish and maintain supply and, if applicable, manufacturing relationships with third parties that can provide, in both amount and quality, adequate products to support clinical development and the market demand for D-PLEX<sub>100</sub> and any future product candidates, if and when approved;

● launch and commercialize any product candidates for which we obtain regulatory and marketing approval, either with third party collaborators or distributors and/or directly by establishing our internal sales, marketing and distribution capabilities;

● expose and educate physicians and other medical professionals to use our products;

● obtain market acceptance, if and when approved, of D-PLEX<sub>100</sub> and any future product candidates from the medical community and third-party payors;

● ensure our product candidates are approved for reimbursement from governmental agencies, health care providers and insurers in jurisdictions where they have been approved for marketing;

● address any competing technological and market developments that impact D-PLEX<sub>100</sub> and any future product candidates or their prospective usage by medical professionals;

● identify, assess, acquire and/or develop new product candidates;

● negotiate favorable terms in any collaboration, licensing or other arrangements into which we may enter and perform our obligations under such collaborations;

● maintain, protect and expand our portfolio of intellectual property rights, including patents, patent applications, trade secrets and know-how;

● avoid and defend against third-party interference or infringement claims;

● attract, hire and retain qualified personnel; and

● locate and lease or acquire suitable facilities to support our clinical development, manufacturing facilities and commercial expansion.

Even if D-PLEX<sub>100</sub> or any future product candidates are approved for marketing and sale, we anticipate incurring significant incremental costs associated with commercializing such product candidates. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or other regulatory agencies, domestic or foreign, or ethical committees in medical centers, to change our manufacturing processes or assays or to perform clinical, nonclinical or other types of studies in addition to those that we currently anticipate. Even if we are successful in obtaining regulatory approvals to market D-PLEX<sub>100</sub> or any future product candidates, our revenue earned from such product candidates will be dependent in part upon the breadth of the product label, the size of the markets in the territories for which we gain regulatory approval for such products, the accepted price for such products, our ability to obtain reimbursement for such products at any price, whether we own the commercial rights for that territory in which such products have been approved and the expenses associated with manufacturing and marketing such products for such markets. Therefore, we may not generate significant revenue from the sale of such products, even if approved. Further, if we are not able to generate significant revenue from the sale of our approved products, we may be forced to curtail or cease our operations. Due to the numerous risks and uncertainties involved in product development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.

**The report of our independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.** 

The report of our independent registered public accounting firm on our audited consolidated financial statements for the period ended December 31, 2025, contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further reports on our consolidated financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financing. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products. This may raise substantial doubts about our ability to continue as a going concern.

**We expect that we will need to raise substantial additional funding, which may not be available on acceptable terms, or at all. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue our product development efforts or other operations.**

We are currently advancing D-PLEX<sub>100</sub> through clinical development in order to obtain regulatory approval. Developing product candidates is expensive, and we expect to continue to incur research and development expenses in connection with our ongoing activities, particularly as we advance product candidates through clinical trials and regulatory approval.

To date, we have financed our operations primarily through the sale of equity securities, convertible loans made by certain of our shareholders or other loan facilities, and royalty-bearing and non-royalty bearing grants that we received from the IIA and FP7. As of February 19, 2026, we had cash, cash equivalents and short-term deposits of $12.7 million. We will require significant additional financing to fund our operations. Our future funding requirements will depend on many factors, including but not limited to:

● the progress, results and costs of our anticipated clinical trials of D-PLEX<sub>100</sub> and any future product candidates;

● the cost, timing and outcomes of regulatory review of D-PLEX<sub>100</sub> and any future product candidates;

● the costs of maintaining our own commercial-scale cGMP manufacturing facility, including costs related to obtaining and maintaining regulatory compliance, and/or engaging third-party manufacturers therefor;

● the scope, progress, results and costs of product development, laboratory testing, manufacturing, preclinical development and clinical trials for any other product candidates that we may develop or otherwise obtain in the future;

● the cost of our future activities, including establishing sales, marketing and distribution capabilities for any product candidates in any particular geography where we receive marketing approval for such product candidates;

● the terms and timing of any collaborative, licensing and other arrangements that we may establish;

● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

● the level of revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if and when approved, may not achieve commercial success. Our product revenues, if any, will be derived from or based on sales of product candidates that may not be commercially available for the foreseeable future, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

We cannot guarantee that financing will be available in sufficient amounts or on terms acceptable to us, if at all, and the terms of any financing may adversely affect the interests or rights of our shareholders. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. Further, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide.

To the extent that we raise capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we raise funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish certain rights to our technologies or our product candidates, or to grant licenses on terms that are not favorable to us.

If we are unable to obtain funding on acceptable terms and on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research, development or manufacturing programs or the commercialization of any approved product, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

**Risks Related to our Reliance on Third Parties**

**We rely on third parties to conduct certain elements of our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.**

We have relied upon, and plan to continue to rely upon, third-party vendors, including CROs, to monitor and manage data for our ongoing preclinical studies and clinical trials. If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. We rely on these CROs for execution of our preclinical studies and clinical trials, and we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the vendors and CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with good clinical practice, cGMP, the Helsinki Declaration, the International Conference on Harmonization Guideline for Good Clinical Practice, applicable European Commission Directives on Clinical Trials, laws and regulations applicable to clinical trials conducted in other territories, and good laboratory practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, including Good Clinical Practice, or GCP, and cGMP regulations, the clinical data generated in our clinical studies may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If any of our relationships with these third-party CROs or vendors terminate, we may not be able to enter into arrangements with alternative CROs or vendors or do so on commercially reasonable terms. In addition, our CROs are not our employees, and, except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated, which could adversely affect our results of operations and the commercial prospects for our product candidates, increase our costs and delay our ability to generate revenue.

Replacing or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, we may encounter similar challenges or delays in the future, which could have a material adverse impact on our business, financial condition and prospects.

**We rely on third parties to manufacture the raw materials, including the active pharmaceutical ingredient that we use to create our product candidates. Our business could be harmed if existing and prospective third parties fail to provide us with sufficient quantities of these materials and products or fail to do so at acceptable quality levels or prices.**

We rely on third- party suppliers for certain raw materials necessary to manufacture our product candidates. Some of these raw materials are difficult to source. Because there are a limited number of suppliers for these raw materials, we may need to engage alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates. In several cases, we rely on a sole provider, and there may be a need to identify additional providers in the future. We do not have any control over the availability of raw materials. If we or our manufacturers are unable to purchase these raw materials on acceptable terms, at sufficient quality levels, at acceptable prices or in adequate quantities, if at all, the development and commercialization of our product candidates or any future product candidates, would be delayed or there would be a shortage in supply, which would impair our ability to meet our development objectives for our product candidates or generate revenues from the sale of any approved products.

Even following our establishment of our own cGMP-compliant manufacturing capabilities, we intend to continue to rely on third- party suppliers for these raw materials, which will continue to expose us to manufacturing risks including:

● reduced control for certain aspects of manufacturing activities;

● termination or nonrenewal of manufacturing and service agreements with third parties in a manner or at a time that is costly or damaging to us; and

● disruptions to the operations of our third-party manufacturers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or service provider.

Certain of our raw material suppliers will be required to become cGMP-compliant and establish a drug master file for the applicable ingredient before we can submit our NDA for D-PLEX<sub>100</sub>. If these suppliers do not successfully carry out their contractual duties or manufacture our raw materials in accordance with regulatory requirements, we will not be able to submit our NDA as planned or complete, or may be delayed in completing, the clinical trials required for approval of D-PLEX<sub>100</sub>. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense prior to the approval of D-PLEX<sub>100</sub> and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

Additionally, we have not yet entered into binding agreements with certain third-party manufacturers to produce the raw materials and products that we use to manufacture our product candidates. Although we intend to rely on third-party manufacturers for the raw materials and products to support the manufacturing of our product candidates for commercialization, we have not yet entered into agreements with certain manufacturers. We may be unable to negotiate binding agreements with the manufacturers to support our commercialization activities at commercially reasonable terms.

**Although we have established our own manufacturing facility, we may utilize third parties as needed to conduct our product manufacturing. Therefore, we are subject to the risk that these third parties may not perform satisfactorily.**

Although we expect that our manufacturing facility will be the primary source of clinical and commercial supply for D-PLEX<sub>100</sub> for at least the first 48 months following a commercial launch, if approved, we intend to evaluate potential third-party manufacturing capabilities if necessary to meet further commercial demand if and when required. In the event that we engage third-party manufacturers and they do not successfully carry out their contractual duties, meet expected deadlines or manufacture D-PLEX<sub>100</sub> in accordance with regulatory requirements or if there are disagreements between us and any third-party manufacturer, we may be delayed in producing sufficient clinical and commercial supply of D-PLEX<sub>100</sub> or other product candidates. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

The manufacture of pharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. We and our contract manufacturers must comply with cGMP requirements. In the event that our contract manufacturers fail to meet cGMP requirements, we may be delayed or unable to supply our products. In addition, manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up and validating initial production and contamination controls. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

We also rely or may in the future rely on third- party manufacturers to conduct quality control reviews, packaging and serialization services for our product candidates or any approved products. We cannot assure you that any stability, sterility or other issues relating to the manufacture of any of our product candidates or any approved products will not occur in the future.

Additionally, our third-party manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our third-party manufacturers were to encounter any of these difficulties, our ability to provide any products to patients, once approved, would be jeopardized. Any adverse developments affecting commercial manufacturing may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the supply of an approved product. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay and could have a material adverse effect on our business, prospects, financial condition and results of operations. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of product manufacture.

**Our reliance on third parties requires us to share our trade secrets and intellectual property, which increases the possibility that a competitor will discover them or that our trade secrets and intellectual property will be misappropriated or disclosed.**

Because we rely on third parties to provide us with the materials that we use to develop and, if appropriate in the future, manufacture our product candidates or approved products, we may, at times, share trade secrets and intellectual property with such third parties. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets and intellectual property. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

Despite our efforts to protect our trade secrets and knowhow, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets by third parties. A competitor's discovery of our trade secrets and knowhow would impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

**Risks Related to Our Intellectual Property**

**If we are unable to obtain and maintain effective patent rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets. 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.**

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and product candidates.

We have sought to protect our proprietary position by filing patent applications in the United States and in other countries, with respect to our novel technologies and product candidates, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

As of February 25, 2026, our portfolio of owned patents and patent applications consists of eight families that protect our technology, including 157 issued patents, including utility and composition of matter patents, one allowed patent application and 18 pending patent applications in the United States, Canada, China, Europe, Japan, Israel, the Eurasian Patent Organization, Hong-Kong, India, Mexico, New Zealand, the Philippines, Singapore, South Korea and Thailand. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.

Further, the patent position of pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. This renders the patent prosecution process particularly expensive and time-consuming. There is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

If we cannot obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively, and our business and results of operations would be harmed.

**We may not have sufficient patent lifespan to effectively protect our products and business.**

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its priority date. Although various regulatory exclusivity extensions may be available, including pursuant to the QIDP designations we have received for D-PLEX<sub>100</sub>, the life of a patent, and the protection it affords, is limited. Even if any of our patent applications mature into issued patents, if we do not have sufficient patent terms or regulatory exclusivity to protect our products, our business and results of operations will be adversely affected.

**Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.**

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming the other requirements for patentability are met, for United States patent applications filed prior to March 15, 2013, the first to conceive a claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the AIA, the United States has moved to a first to file system. The AIA also includes a number of significant changes that affect the way patent applications are prosecuted and may also affect patent litigation. The courts have yet to address many of these provisions and the applicability of the AIA and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. In general, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.

**If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.**

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.

**If we are unable to maintain effective proprietary rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets.**

In addition to the protection afforded by any patents that have been or may be granted, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining the physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

**Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidate. Such litigation or licenses could be costly or not available on commercially reasonable terms.**

It is inherently difficult to conclusively assess our freedom to operate without infringing on third- party rights. Our competitive position may suffer if patents issued to third parties or other third- party intellectual property rights cover our product candidates or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right concerned or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our product candidates. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our product candidates or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. applications filed before November 29, 2000, and certain U.S. applications filed after that date that will not be filed outside the U.S. remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing to which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our product candidates or the use of our product candidates. Third- party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing of our product candidates. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our product candidates that are held to be infringing. We might, if possible, also be forced to redesign our product candidates so that we no longer infringe the third- party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

**Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.** 

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and reexamination proceedings before the United States Patent and Trademark Office, or USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the pharmaceutical industry expands and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any materials formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidates unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable.

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

**We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.**

Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license, or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.

For example, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution's rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, we may have to abandon development of that program and our business and financial condition could suffer.

**We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.**

Competitors may infringe our intellectual property or that of our licensors that we may acquire in the future. If we or a future licensing partner were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Under the AIA, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our Ordinary Shares.

**We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.**

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees' former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

**We may be subject to claims challenging the inventorship of our intellectual property.**

We may be subject to claims that former employees, collaborators or other third parties have an interest in or right to compensation with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. To the extent that our employees have not effectively waived the right to compensation with respect to inventions that they helped create, they may be able to assert claims for compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims are successful which in turn could impact our future profitability.

**Changes in United States and international patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.**

Our success is heavily dependent on intellectual property. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and enforcing these patents is costly, time consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on future actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain patents or to enforce patents that we might obtain in the future.

**We may not be able to protect our intellectual property rights throughout the world.**

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own product candidates and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products or methods of treatment, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

**Kreos Capital VI (Expert Fund) LP may seize our owned equipment, intellectual property and all shares we hold in PolyPid Inc. and PolyPid Pharma SRL if we fail to repay a loan.**

On April 5, 2022, we entered into a secured loan agreement, or the Loan Agreement, for up to $15 million with Kreos Capital VI (Expert Fund) LP, or Kreos. For more information regarding the Loan Agreement please see "Item 5.B- Liquidity and Capital Resources". Under the Loan Agreement, we granted Kreos a first priority fixed charge over all of our owned equipment and intellectual property, including without limitation, copyrights, patents, trademarks and trade names, as well as all shares we hold in PolyPid Inc. and PolyPid Pharma SRL. That means that our owned equipment, intellectual property assets and our ownership of the shares of PolyPid Inc. and PolyPid Pharma SRL are used as collateral for the loan. Additionally, PolyPid Inc. entered into a guaranty agreement with Kreos, all as security for monies borrowed by us under the Loan Agreement. Kreos may seize our owned equipment, intellectual property all shares we hold in PolyPid Inc. and PolyPid Pharma SRL if we fail to repay the loan, which could materially and adversely affect our operations.

**Risks Related to Our Business Operations**

**European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information. Failure to comply with such regulations may result in substantial fines, other administrative penalties and civil claims being brought against us.**

We may collect, process, use or transfer personal information from individuals located in the EU in connection with our business, including in connection with conducting clinical trials in the EU. Additionally, we intend to commercialize D-PLEX<sub>100</sub>, and any of our product candidates that receive marketing approval, in the EU. The collection and use of personal health data in the EU is governed by the GDPR, along with other European Union and country-specific laws and regulations. The United Kingdom and Switzerland have also adopted data protection laws and regulations. These legislative acts (together with regulations and guidelines) impose requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals' requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data that we process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. Failure to comply with the requirements of the GDPR and related national data protection laws of the member states of the EU may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

**The United Kingdom's withdrawal from the EU may adversely impact our ability to obtain regulatory approvals of our product candidates in the United Kingdom, result in restrictions or imposition of taxes and duties for importing our product candidates into the United Kingdom, and may require us to incur additional expenses in order to develop, manufacture and commercialize our product candidates in the United Kingdom.**

Following the result of a referendum in 2016, the United Kingdom left the EU on January 31, 2020, commonly referred to as Brexit. A trade and cooperation agreement that outlines the future and trading relationship between the United Kingdom and the EU was agreed to in December 2020.

Since a significant proportion of the regulatory framework in the United Kingdom applicable to our business and our product candidates is derived from European Union directives and regulations, Brexit has had, and will continue to have, a material impact on the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the United Kingdom. For example, Great Britain is no longer covered by the centralized procedures for obtaining European Union-wide marketing authorizations from the EMA, and a separate marketing authorization will be required to market our product candidates, including D-PLEX<sub>100</sub> in Great Britain. It is currently unclear whether the Medicines & Healthcare products Regulatory Agency in the United Kingdom is sufficiently prepared to handle the increased volume of marketing authorization applications that it is likely to receive. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would delay or prevent us from commercializing our product candidates in the United Kingdom and limit our ability to generate revenue and achieve and sustain profitability. We could face significant additional expenses to obtain regulatory approval for our products in the United Kingdom.

**If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.**

Our research, development and manufacturing activities and our third- party manufacturers' and suppliers' activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers' facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages, such liability could exceed our resources, and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.

**Our employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.**

We are exposed to the risk of fraud or other misconduct by our employees and independent contractors. Misconduct by these parties could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee and independent contractor misconduct could also involve the improper use of information obtained in the course of clinical trials, including individually identifiable information, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product candidates, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

**Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.**

We generally enter into non-competition agreements with our employees and certain key consultants. These agreements prohibit our employees and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us.

For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company's confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

**International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States or Israel.**

Other than our headquarters and other operations which are located in Israel (as further described below), we currently have limited international operations, but our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product candidates. We plan to retain third-party distributors and conduct physician, infectious disease specialist, hospital pharmacist and patient association outreach activities, as well as clinical trials, outside of the United States, European Union and Israel. Doing business internationally involves a number of risks, including but not limited to:

● multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits, and licenses;

● failure by us to obtain regulatory approvals for the use of our product candidates in various countries;

● additional potentially relevant third-party patent rights;

● complexities and difficulties in obtaining protection and enforcing our intellectual property;

● difficulties in staffing and managing foreign operations;

● complexities associated with managing multiple third-party payor reimbursement regimes, government payors, prince controls or patient self-pay systems;

● limits in our ability to penetrate international markets;

● financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;

● an outbreak of a contagious disease, which may cause us or our distributors, third- party vendors and manufacturers and/or customers to temporarily suspend our or their respective operations in the affected city or country;

● natural disasters, political and economic instability, including wars (such as the war between Israel and Hamas), terrorism, and political unrest, boycotts, curtailment of trade, and other business restrictions;

● certain expenses including, among others, expenses for travel, translation and insurance; and

● regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

**Risks Related to Ownership of Our Ordinary Shares**

**Our executive officers, directors and principal shareholders will maintain the ability to exert significant control over matters submitted to our shareholders for approval.**

As of February 25, 2026, our executive officers, directors and principal shareholders who own more than 5% of our outstanding Ordinary Shares, in the aggregate, beneficially own a substantial majority of our ordinary shares. As a result, if these shareholders were to act together, they would be able to exert significant influence over all matters submitted to our shareholders for approval (including a prospective acquisition or other change of control of our company), as well as our management and affairs.

**We may be or may become classified as a passive foreign investment company. If we are or become classified as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences as a result.**

Generally, for any taxable year, if at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income (including amounts derived by reason of the temporary investment of funds raised in offerings of our shares) and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of our Ordinary Shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our Ordinary Shares by individuals who are U.S. holders, and having interest charges apply to distributions by us and gains from the sales of our shares.

Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which, assuming we are not a "controlled foreign corporation," or a CFC, under Section 957(a) of the Internal Revenue Code of 1986, as amended, or the Code, for the year being tested, may be determined based on the fair market value of each asset, with the value of goodwill and going concern value determined in large part by reference to the market value of our Ordinary Shares, which may be volatile). Based upon the estimated value of our assets, including any goodwill, and the nature and estimated composition of our income and assets, we may be classified as a PFIC for the taxable year ended December 31, 2025, and in future taxable years. In particular, so long as we do not generate revenue from operations for any taxable year and do not receive any research and development grants, or even if we receive a research and development grant, if such grant does not constitute gross income for United States federal income tax purposes, we likely will be classified as a PFIC for such taxable year. Because the determination of whether we are a PFIC for any taxable year is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC in any taxable year.

The tax consequences that would apply if we were classified as a PFIC would also be different from those described above if a U.S. shareholder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. shareholders with the information necessary for a U.S. shareholder to make a QEF election. Prospective investors should assume that a QEF election will not be available.

**If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.**

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a "United States shareholder" with respect to each "controlled foreign corporation" in our group (if any). Because our group includes one or more U.S. subsidiaries, we expect that certain of our non-U.S. subsidiaries will be treated as controlled foreign corporations (regardless of whether we are or are not treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of "Subpart F income," "global intangible low-taxed income" and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult their own advisors regarding the potential application of these rules to its investment in the shares.

**As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, and we will not be subject to certain U.S. securities laws including, but not limited to, U.S. proxy rules and the filing of certain Exchange Act reports.**

As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required by the Nasdaq Stock Market for domestic U.S. 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 Capital Market may provide less protection to you than what is accorded to investors under the listing rules of Nasdaq applicable to domestic U.S. issuers.

As a foreign private issuer, we are exempt from the rules and regulations under the Securities Exchange Act of 1934, or the Exchange Act, related to the furnishing and content of proxy statements, including the applicable compensation disclosure requirements. Nevertheless, pursuant to regulations promulgated under the Israeli Companies Law, 5759-1999, or the Israeli Companies Law, we are required to disclose the annual compensation of our five most highly compensated office holders on an individual basis. Such disclosure will not be as extensive as that required of a U.S. domestic issuer. Our officers, directors and principal shareholders are also exempt from the reporting (until March 18, 2026 for our officers and directors) 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 reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and we will be exempt from filing quarterly reports with the SEC under the Exchange Act. Moreover, we will not be required to comply with Regulation FD, which restricts the selective disclosure of material information, although we intend to voluntarily adopt a corporate disclosure policy substantially similar to Regulation FD. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.

We would lose our foreign private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

**Risks Related to Israeli Law and Our Operations in Israel**

**Potential political, economic and military instability in Israel, where our headquarters, members of our management team, our production facilities, and employees are located, may adversely affect our results of operations.**

Our headquarters and principal offices and most of our operations are located in the State of Israel. In addition, all of our key employees and officers are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business.

Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or a significant downturn in the economic or financial condition of Israel, could adversely affect our operations. Ongoing and revived hostilities or other Israeli political or economic factors could harm our operations, product development and results of operations.

On October 7, 2023, an unprecedented attack was launched against Israel by terrorists from the Hamas terrorist organization that infiltrated Israel's southern border from the Gaza Strip and in other areas within the state of Israel attacking civilians and military targets while simultaneously launching extensive rocket attacks on the Israeli population. In response, the Security Cabinet of the State of Israel declared war against Hamas. As of October 9, 2025, Israel and Hamas have entered into a ceasefire agreement intended to permanently end the war. However, there are no assurances that such an agreement will hold. The security situation in the region remains fluid and any renewed military actions, restrictions, or government-imposed measures could adversely affect our operations and financial condition. While none of our facilities or infrastructure have been damaged since the war with Hamas broke out on October 7, 2023, the import and export of goods may experience disruptions in and out of Israel as a result of military conflict. Such disruption could materially adversely affect our business, prospects, financial condition, and results of operations.

In April 2024 and October 2024, Iran launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel. On June 13, 2025, in light of continued nuclear threats and intelligence assessments indicating imminent attacks, Israel launched a preemptive strike directly targeting military and nuclear infrastructure inside Iran aimed to disrupt Iran's capacity to coordinate or launch further hostilities against Israel, as well as disrupt its nuclear program. On June 21, 2025, the United States military conducted targeted air strikes against three nuclear sites within Iran and on June 23, 2025 Iran retaliated against U.S. interests in the region.

On June 24, 2025, a ceasefire was implemented between Iran and Israel and, as of July 1, 2025, still remains in place. Nonetheless, hostilities between Iran and Israel and the United States may resume in the near future, which could create significant volatility in the global economy as well as disruptions to global supply chains.

Further, many Israeli citizens are obligated to perform several days, and in some cases, more, of annual military reserve duty each year until they reach the age of 40 (or older for certain reservists). In response to increases in terrorist and military activity hostile to Israel, there have been periods of significant call-ups of military reservists to active duty. As of February 25, 2026, none of our employees was deployed for reserve military service.

In addition, several countries, principally in the Middle East, restrict doing business with Israel, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. The restrictive laws, policies, or practices directed towards Israel or Israeli businesses could, individually or in the aggregate, have a material adverse effect on our business in the future, for example by way of sales opportunities that we could not pursue or from which we will be precluded. In addition, should the movement for boycotting, divesting, and sanctioning Israel and Israeli institutions (including universities) and products become increasingly influential in the United States and Europe, this may also adversely affect our business and financial condition. Further deterioration of Israel's relations with the Palestinian Authority or countries in the Middle East could expand the disruption of international trading activities in Israel, may materially and negatively affect our business conditions, could harm our results of operations, and adversely affect the market price of our Ordinary Shares.

Furthermore, the Israeli government is currently pursuing extensive changes to Israel's judicial system, which have sparked extensive political debate. In response to the foregoing developments, a series of civil unrests and demonstrations throughout Israel took place. Additionally, individuals, organizations, and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or conduct business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. Such proposed changes may also adversely affect the labor market in Israel or lead to political instability or civil unrest. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors

**Our operations are subject to currency and interest rate fluctuations.** 

Although our functional currency is the U.S. dollar, and our financial records are maintained in U.S. dollars, we also incur expenses in Euros and NIS. In the future, we expect that a substantial portion of our revenues will be generated in U.S. dollars, Euros and other foreign currencies, although we currently incur a significant portion of our expenses in currencies other than U.S. dollars, mainly NIS. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk, and our financial results may be affected by fluctuations in the exchange rates of currencies in the countries in which our prospective product candidates may be sold. We currently partially hedge our foreign currency exchange rate risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies, but these hedge agreements may not be sufficient to fully protect us from the risks related to exchange rate fluctuations.

**We received Israeli government grants for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received.**

Our research and development efforts have been financed in part through royalty-bearing and non-royalty-bearing grants in an aggregate amount of $6.6 million that we received from the IIA as of February 25, 2026. The last IIA approved research and development grants ended on November 30, 2022. With respect to the royalty-bearing grants we are committed to pay royalties at a rate of 3.0% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest. With respect to IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, as published by the CME Group or any authorized body of the Federal Reserve on the first trading day of each year or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.

As of December 31, 2025, our contingent liabilities regarding IIA grants received by us were in an aggregate amount of $5.5 million. We are further required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer or license of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development.

The transfer or license of IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported products, technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred or licensed technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

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

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company's issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the Company's outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer's response date.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to 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. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

**It may be difficult to enforce a judgment of a U.S. court against us and our executive officers and directors in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our executive officers and directors and these experts.**

We were incorporated in Israel. Substantially all of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be 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, you may not be able to collect any damages awarded by either a U.S. or foreign court.

**Your rights and responsibilities as a shareholder will be governed in key respects by Israeli laws, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.**

The rights and responsibilities of the holders of our Ordinary Shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in such company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company's amended and restated articles of association, increases in a company's authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. However, Israeli law does not define the substance of this duty of fairness. See "Item 6.C. Board Practices— Duties of Shareholders" for additional information. There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. companies.

**General Risk Factors**

**The market price of our Ordinary Shares may be highly volatile, and you may not be able to resell your Ordinary Shares at or above the price you paid.**

The trading price of our Ordinary Shares is likely to be volatile. The stock market in general, and the market for pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless of our actual operating performance. As a result of this volatility, you may not be able to sell your Ordinary Shares at or above the price you paid. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our Ordinary Shares:

● announcements of regulatory approvals or the failure to obtain them, or specific label indications or patient populations for their use, or changes or delays in the regulatory review process;

● inability to enter into agreements with third parties to market and sell our product candidates or establish sales and marketing capabilities;

● inability to obtain the approvals necessary to commence further clinical trials;

● unsatisfactory results of clinical trials, whether final or interim;

● announcements of therapeutic innovations or new products by us or our competitors;

● adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

● changes or developments in laws or regulations applicable to any candidate product in any of our platforms;

● changes in the structure of healthcare payment systems;

● any adverse changes to our relationship with manufacturers or suppliers, especially manufacturers of candidate products;

● any intellectual property infringement actions in which we may become involved;

● announcements concerning our competitors or the pharmaceutical industry in general;

● achievement of expected product sales and profitability or our failure to meet expectations;

● our commencement of, or involvement in, litigation;

● any major changes in our Board of Directors or management;

● general market, political, and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East;

● legislation in the United States or any other territory relating to the sale or pricing of pharmaceuticals; and

● coordinated buying or selling activity in our Ordinary Shares, including market manipulation.

If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our Ordinary Shares could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management's attention and resources, which could seriously harm our business, financial condition, results of operations and prospects.

**Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cybersecurity.**

Despite the implementation of security measures intended to secure our data against impermissible access and to preserve the integrity and confidentiality of our data, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Moreover, our employees are frequently working from their homes and remotely access our IT networks. Such remote working mode creates the risk of attacking the end-point user stations, connection channels and gateways. If such an event was to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, including under data privacy laws such as the GDPR, damage to our reputation, and the further development of our drug candidates could be delayed.

**Our future success depends in part on our ability to retain our senior management team and to attract, retain and motivate other qualified personnel.**

We are highly dependent on the members of our senior management team. The loss of their services without a proper replacement may adversely impact the achievement of our objectives. Our employees may leave our employment at any time. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue for the foreseeable future. As a result, competition for skilled personnel is intense, and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit and retain qualified personnel, or the loss of the services of any members of our senior management team without proper replacement, may impede the progress of our research, development and commercialization objectives. We do not maintain key man insurance for our senior management team.

**We will continue to incur significant increased costs as a result of operating as a public company in the United States, and our management will be required to devote substantial time to compliance initiatives.**

As a public company whose Ordinary Shares are listed in the United States, we are subject to an extensive regulatory regime, requiring us, among other things, to maintain various internal controls and facilities and to prepare and file periodic and current reports and statements, including reports on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Complying with these requirements is costly and time consuming. In the event that we are unable to demonstrate compliance with our obligations as a public company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or The Nasdaq Capital Market, and investors may lose confidence in our operating results and the price of our Ordinary Shares could decline.

Our independent registered public accounting firm was not engaged to perform an audit of our internal control over financial reporting, and as long as we remain a non-accelerated filer, as such term is defined in the Exchange Act, we will be exempt from the requirement to have an independent registered public accounting firm perform such audit. Accordingly, no such opinion was expressed or will be expressed any during any such period. If we become an accelerated filer, our independent registered public accounting firm will be required to attest to our management's annual assessment of the effectiveness of our internal controls over financial reporting, which will entail additional costs and expenses.

**We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.**

We have never declared or paid cash dividends on our Ordinary Shares. 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 in the foreseeable future. As a result, capital appreciation, if any, of our Ordinary Shares will be investors' sole source of gain for the foreseeable future. In addition, Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes.

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

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

**Our amended and restated articles of association provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our shareholders' ability to choose the judicial forum for disputes with us, our directors, shareholders, or other employees.**

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the foregoing provision of our amended and restated articles of association. However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits, or proceedings asserting a cause of action arising under the Securities Act) in other companies' organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provision in our amended and restated articles of association. If a court were to find the exclusive forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations.

Although we believe the exclusive forum provision benefit us by providing increased consistency in the application of U.S. federal securities laws the Israeli Companies Law, or New York law, as applicable, in the types of lawsuits to which they apply, such exclusive forum provision may limit a shareholder's ability to bring a claim in the judicial forum that they find favorable and may increase certain litigation costs for disputes with us or any of our directors, shareholders, officers, or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers, or other employees.

**ITEM 4. INFORMATION ON THE COMPANY**

**A. History and Development of the Company.**

We were incorporated in the State of Israel on February 28, 2008. Our Ordinary Shares are currently listed for trading on the Nasdaq Capital Market under the symbol "PYPD."

Our principal executive offices are located at 18 Hasivim Street, Petach Tikva 4959376, Israel. Our telephone number in Israel is +972 (74) 719-5700. Our website address is *www.polypid.com*. The information contained on our website or available through our website is not incorporated by reference into and should not be considered a part of this annual report on Form 20-F, and the reference to our website in this annual report on Form 20-F is an inactive textual reference only. PolyPid Inc. is our agent in the United States, and its address is 372 Franklin Ave., P.O. Box 558, Nutley, NJ 07110.

We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we are not required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.

In 2025, 2024 and 2023, our capital expenditures amounted to $0.5 million, $0.1 million and $0.2 million, respectively. Our current capital expenditures are primarily for manufacturing facility and equipment, computers, software, research and development equipment and office improvements substantially all in Israel, and we expect to finance these expenditures primarily from cash on hand.

The SEC maintains an internet site, http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our internet address is *www.polypid.com*. The information on that website is not part of this Annual Report and is not incorporated by reference herein.

**B. Business Overview.** 

We are an innovative biopharmaceutical company dedicated to improving patient outcomes by elevating treatment effectiveness, right where care begins. We develop long-acting, controlled-release medicines that deliver therapy precisely at the site of care, addressing critical unmet medical needs. Our diverse pipeline spans surgical care, metabolic diseases, and beyond. Our lead product candidate, D-PLEX<sub>100</sub>, pairs our novel proprietary PLEX technology with doxycycline, a broad spectrum and FDA-approved antibiotic. D-PLEX<sub>100</sub> is administered directly into the surgical site during surgery, and provides a prolonged and continuous release of high local concentration of doxycycline for a period of 30 days for the prevention of SSIs. In June 2025, we announced positive topline results from our pivotal SHIELD II Phase 3 study of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions, with D-PLEX<sub>100</sub> successfully meeting the primary and all key secondary endpoints of the study. Infections resulting from surgery can be fatal and create a significant public health burden despite the extensive use of systemically administered antibiotics both pre- and post-operatively and other measures taken to reduce infection risk in the intra-operative setting.

The CDC estimates that SSIs result in up to $10 billion of additional hospital costs per year in the United States. The CDC also estimates that SSIs are the costliest HAI type of event in the United States. SSIs occur in approximately 2% to 4% of all patients undergoing inpatient surgery and account for 20% of all HAIs in United States. In their last guidelines, the WHO and the CDC have labeled SSIs as a high priority unmet medical need due to the associated morbidity, mortality and economic cost burden.

We believe that D-PLEX<sub>100</sub>, if approved, would be a significant improvement over the current SoC, which includes systemic administration of antibiotics.

In June 2025, we announced positive topline results from our pivotal SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions.

The primary efficacy endpoint of the study was successfully met, with a significantly lower proportion of primary endpoint events among patients who received D-PLEX<sub>100</sub> plus SoC (n=405; 10.9%), compared to SoC alone (n=393; 18.1%), representing a 40% reduction (p<0.005). The primary endpoint is the combination of deep and superficial SSIs, all-cause mortality and surgical reinterventions at the same incision of the original index surgery. SHIELD II also successfully met all three key secondary endpoints of the study. The first key secondary endpoint was met, with a 60% reduction in deep and superficial SSI rates among patients who received D-PLEX<sub>100</sub> plus SoC (3.8%) compared to those who received SoC alone (9.5%) (p<0.005).

SHIELD II trial revealed a good safety profile with no difference in serious treatment-emergent adverse events between patients treated with D-PLEX₁₀₀ arm versus standard of care arm.

On December 3, 2025, we announced positive FDA pre-NDA meeting minutes for D-PLEX₁₀₀ supporting an NDA submission. We expect to submit an NDA on a rolling basis beginning by the end of the first quarter of 2026, leveraging our Fast Track and Breakthrough Therapy designations.

In Europe, on August 2, 2022, we entered into a license, distribution and supply agreement with Advanz, pursuant to which we granted the exclusive right to Advanz to market, advertise, promote, distribute, offer for sale, sell and import our product D-PLEX<sub>100</sub> for the prevention of (i) post abdominal surgery incisional infection and/or (ii) post cardiac surgery sternal infection in the EEA and the United Kingdom. The term of the license is until the later of December 31, 2035, or 10 years after the first commercial sale of D-PLEX<sub>100</sub>. The license is also terminable by either party under certain limited circumstances.

In September 2022, we received confirmation from the EMA which was reconfirmed in December 2025, that D-PLEX<sub>100</sub> is eligible for submission of a MAA in the EU under the EMA's centralized procedure. The centralized process eligibility is granted to D-PLEX<sub>100</sub> under the Therapeutic Innovation criteria which underscores that D-PLEX<sub>100</sub> potentially provides a new alternative to patients in preventing post abdominal SSIs. We expect to submit an MAA in the E.U. shortly after NDA submission to the FDA.

In addition to our lead program D-PLEX<sub>100</sub>, our pipeline includes early-stage programs. In July 2025, we unveiled our long-acting GLP-1 receptor agonists (glucagon-like peptide-1 RA) delivery platform which aims to subcutaneously release GLP-1 RA for approximately 60 days, significantly longer than current weekly injection regimens. The platform enables linear drug release, potentially overcoming the burst release observed with currently marketed weekly formulations, and provides a foundation that can potentially be expanded beyond GLP-1 to support the development of additional metabolic health therapies.

OncoPLEX, PolyPid's lead intra-tumoral cancer therapy drug candidate, can potentially provide controlled local exposure to docetaxel, one of the most widely used chemotherapy agents, directly at the tumor site for several weeks to potentially reduce local tumor reoccurrence, the potential spreading of cancer cells, and ultimately improve the overall survival rate of cancer patients. OncoPLEX has been evaluated successfully in 9 various animal tumor models, both as adjuvant and neoadjuvant, including murine colon carcinoma, melanoma and glioblastoma animal models. In November 2021, a successful Pre-IND meeting with the FDA supported a Phase 1/2 clinical trial of OncoPLEX as a potential part of first-line combination therapy for patients newly diagnosed with GBM.

In December 2024, we announced a new research and development collaboration with ImmunoGenesis, Inc., or ImmunoGenesis, a Houston-based clinical-stage biotechnology company to develop novel formulations combining our experience with our proprietary PLEX Technology and ImmunoGenesis' potent STimulator of INterferon Genes, or STING, agonist drug candidate to potentially enhance intratumoral treatment for solid tumors.

We intend to further expand research collaborations with biopharmaceutical and biotech companies leveraging our PLEX Technology. SHIELD II pharmacokinetic data validated the PLEX technology platform in large clinical trials, providing local and controlled release of drug molecules directly at the disease target organ over a pre-determined period of time. PLEX can be paired with a wide variety of marketed drugs or product candidates, including small molecules, peptides, antibodies and nucleic acid-based drugs. We intend to further engage in discussions with leading biopharmaceutical companies regarding licensing our PLEX technology for potential application in various therapeutic areas.

We recently unveiled our Kynatrix™ technology. Over the past years, we have significantly expanded our drug delivery capabilities beyond the original PLEX technology. These advancements include the ability to support new therapeutic areas and delivery approaches, with the first test case being our expansion into metabolic diseases through an ultra long-acting GLP-1 receptor agonist program. These advancements have generated additional intellectual property beyond PLEX and are now unified under the newly introduced Kynatrix™ technology.

**Our Pipeline**

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As of February 25, 2026, we have 157 issued patents, including utility and composition of matter patents, one allowed patent application and 18 pending patent applications in the United States, Australia, Brazil, Canada, China, Europe, Hong-Kong, Israel, Japan, Mexico, New Zealand, Singapore, South Korea and Thailand. Our issued patents expire between 2029 and 2035.

**State-of-the-Art Manufacturing Facility**

We currently lease approximately 22,000 square foot, state-of-the-art, sterile manufacturing facility in Israel to enhance supply chain control, increase our supply capacity and meet clinical demand for our future clinical trials of D-PLEX<sub>100</sub>, as well as for initial commercial demand if D-PLEX<sub>100</sub> is approved and for manufacturing additional potential future PLEX products. The facility is designed to comply with the FDA's cGMP regulations and EMA regulations. In 2019, the facility was cGMP certified by the IMOH and inspected by an EU-qualified person, enabling cGMP manufacturing of D-PLEX<sub>100 </sub>for our ongoing and planned clinical trials of D-PLEX<sub>100</sub> as well as for future commercial products. The manufacturing process was scaled up to increase our commercial supply capacity to meet the expected market demand for at least 48 months from product launch. In September 2023, the IMOH completed a GMP audit of our manufacturing facility without any critical or major findings and in September 2025, we announced the successful completion of an additional GMP audit by the IMOH. The audits were conducted as part of IMOH's routine evaluation of our manufacturing process for D-PLEX<sub>100</sub>. The audits concluded that our manufacturing facility, process and quality system conform to the requirements of cGMP for medicinal products. These audits are also valid for Europe under the provisions of the ACAA between the EU and Israel.

**Our Strategy**

Our goal is to leverage our Kynatrix technology to develop and commercialize a pipeline of potentially transformative therapies for the local and prolonged delivery of drugs to address diseases with high unmet medical needs. The key elements of our strategy are as follows:

●  ***Successfully complete clinical development of D-PLEX<sub>100</sub> for the prevention of SSIs.*** On June 2025 we announced positive topline results from our pivotal SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions. . We intend to obtain an NDA approval for D-PLEX<sub>100</sub> and pursue a broad label for D-PLEX<sub>100</sub> for the prevention of SSIs, the scope of which will depend on the clinical data generated from our clinical trials and discussions with the FDA and the EMA.

●  ***Pursue expedited regulatory pathways for our product candidates.*** We are pursuing expedited pathways to approval for our portfolio of product candidates. PLEX is paired with unmodified FDA- and/or EMA-approved drugs with established clinical safety, efficacy and tolerability. Additionally, the polymers and lipids that we use in PLEX have been used in other medical products that have been approved by the FDA and/or the EMA. Accordingly, we are pursuing and will pursue expedited clinical development and make regulatory submissions for our product candidates, including D-PLEX<sub>100</sub>, that allow us to rely in part on previous findings of safety and efficacy for the API, including the Section 505(b)(2) approval pathway in the United States and the comparable hybrid application pathway in the EU. Further, D-PLEX<sub>100</sub> has received three QIDP designations from the FDA for the prevention of post-abdominal surgery incisional infection, for the prevention of sternal wound infection post-cardiac surgery and for prevention of post-colorectal SSIs, which will provide an increased level of communication with the FDA during the development process. We also received the FDA's Fast Track Designation for D-PLEX<sub>100</sub> for topical use for the prevention of post-cardiac surgery sternal infections in November 2018, in July 2020 for the prevention of post abdominal surgery incisional infections and in September 2021 for prevention of post-colorectal SSIs, which could potentially expedite the FDA's review of our NDA. We obtained breakthrough therapy designation in November 2020 for D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing elective colorectal surgery.

●  ***Execute on our go-to-market commercial strategy.*** If approved, we intend to launch D-PLEX<sub>100</sub> worldwide through commercial partnerships. We believe that partnering with leading pharmaceutical companies focusing on hospital business will be instrumental to maximize our commercial success and launch of any approved products. In the United States, we believe that the cost-effectiveness and potential clinical benefits of D-PLEX<sub>100</sub> will support its commercial launch under existing Medicare rates given the associated morbidity and cost burden of SSIs and the associated penalties imposed on hospital reimbursement from the CMS. In addition, we believe that there may be opportunities for reimbursement for D-PLEX<sub>100</sub> under CMS's New Technology Add-on Payment, or NTAP, program.

●  ***Expand our product pipeline for additional indications using our PLEX technology.*** In addition to the development of D-PLEX<sub>100</sub> for the prevention of SSIs, PLEX has the potential for the prevention or treatment of other important, localized medical conditions. We intend to maximize the commercial potential of PLEX by exploring these additional indications, either independently or through collaborations with other biopharmaceutical companies. Our PLEX technology can be paired with a wide variety of marketed drugs or product candidates, including small molecules, peptides, antibodies and nucleic acid-based drugs. For example, in July 2025 we unveiled our long-acting GLP-1 receptor agonists (glucagon-like peptide-1 RA) delivery platform which aims to subcutaneously release GLP-1 RA for approximately 60 days, significantly longer than current weekly injection regimens, for improved patient compliance and enhanced therapeutic outcomes in the rapidly growing obesity and diabetes market.

●  ***Pursue research collaborations with biopharmaceutical and biotech companies.*** We believe that our PLEX technology can be paired with a wide variety of marketed drugs or product candidates, including small molecules, peptides, antibodies and nucleic acid-based drugs. Many leading biopharmaceutical and biotech companies have marketed drugs or product candidates in development that have limited efficacy or safety due to systemic delivery and owing to potentially poor drug penetration from the blood stream into the needed organ or other target tissues, or viability for systemic administration due to instability, toxicity and cost. Pairing these drugs or product candidates with PLEX has the potential to address these limitations and potentially extend the drug's clinical benefit and lifecycle before and after patent expiration. For example, in December 2024 we announced a new research and development collaboration with ImmunoGenesis. The collaboration focuses on the development of novel formulations utilizing our experience with our proprietary PLEX Technology and ImmunoGenesis' potent STING agonist drug candidate to potentially enhance treatment for solid tumors. The collaboration aims to address challenges of potent STING agonists which are susceptible to rapid clearance when administered intratumorally, limiting the exposure time within the tumor microenvironment for effective anti-tumor activity.

●  ***Build a fully integrated biopharmaceutical company utilizing our manufacturing facility.*** Our state-of-the-art, sterile manufacturing facility is cGMP certified by the IMOH and inspected by a European Union-qualified person, enabling cGMP manufacturing of D-PLEX<sub>100</sub> for our future clinical trials as well as for initial commercial demand if D-PLEX<sub>100</sub> is approved and for manufacturing additional potential future PLEX products. Our manufacturing facility will serve to enhance supply chain processes, increase our supply capacity and meet clinical demand for our future clinical trials of D-PLEX<sub>100</sub>. We estimate that our facility will meet commercial demand for at least the first 48 months following a commercial launch of D-PLEX<sub>100</sub>, if approved. We intend to use this capacity as the basis to build a fully integrated biopharmaceutical company, supported by our in-house research and development and regulatory team and our anticipated commercial infrastructure. If necessary to meet further commercial demand in the future, we may expand our manufacturing capabilities or employ third-party contract manufacturing organizations.

**The Problem: Limitations to Current Drug Delivery Systems**

The systemic administration of drugs may have significant disadvantages for the treatment of localized medical conditions in the body, including limited efficacy due to poor penetration from the blood stream into the treated organ or other target tissues and challenges related to sensitivity to blood factors. These limitations are especially challenging for the prevention of SSIs during surgeries, as the surgical incision itself creates an interruption of the blood stream and therefore limits the local concentration of administered prophylactic systemic antibiotic into the surgical site. This limited efficacy often results in the need to use a significantly higher quantity of drugs over a prolonged period of time, which can result in substantial side effects. Additionally, systemic administration can be associated with complexities of drug-drug interactions in the context of polypharmacy for patients with comorbid conditions. In the case of antibiotics, systemic administration results in challenges related to the emergence of antibiotic resistance.

Localized delivery of medications for site-specific conditions may have significant advantages over systemic administration because it has the potential to increase the efficacy and clinical benefit of the treatment. Localized delivery may also reduce the risk of overall toxicity and adverse side effects, improve patient compliance and enable a much lower amount of medicine to be used in treatment. In order to address the limitations of systemic administration to treat localized medical conditions, an effective localized drug delivery system must be able to selectively deliver the needed medication to the specific target site, ensure the appropriate concentration needed and release the active medication in a controlled, consistent method over the entire desired treatment period.

Existing localized treatments, including extended release formulations based on polymer-only or lipid-only technologies, such as liposomal-based technologies, frequently suffer from one or more of the following limitations:

●  ***Short release periods.*** An effective regimen to treat serious localized medical conditions, including infections, often needs to span weeks. For example, in the case of post-operative wound management, bacteria have the potential to proliferate in the wound, where blood supply is restricted. Most local delivery systems are able to generate sustained, local concentrations that are effective for only up to several days; however, the post-operative recovery phase may span for a longer period of time.

●  ***Lack of controlled drug release rates- initial spike.*** For a localized delivery system to be effective, it must deliver a non-toxic but adequate and constant dosage of the API to the target site throughout the release period. Current systems, often based only on polymers or only on lipids, have limited ability to control drug release rates. As a result, these systems often release the drug with an initial high burst manner, followed by a rapid decline in the release rate, ultimately generating low local drug concentration. This drug release profile is both less effective than a steadier more controlled delivery approach and may cause safety issues.

●  ***Active drug degradation.*** Drugs often need to be isolated from body fluids to prevent rapid degradation and chemical changes to the underlying drug. In order to effectively administer such drugs locally over prolonged periods, the implanted drug reservoir needs to be protected until released, ideally in a non-hydrating form.

●  ***Susceptibility to drug migration.*** Locally administered drugs reservoirs are more effective when they are anchored at the treatment site and unable to move or migrate in the body after application. Many localized delivery systems are susceptible to migration away from the treatment site after application.

●  ***Potential chemical modifications to underlying drug.*** Currently developed localized delivery systems can modify or form chemical bonds with the underlying drug, which may alter its mechanism of action, potentially impeding the regulatory process for approval and making development longer and more expensive.

●  ***Limited application to different drug types.*** Many localized delivery systems are suited only to a particular drug, or class of drugs, and are therefore limited in their broader clinical scope.

●  ***Difficult to use.*** Localized delivery systems may require extensive training in their application and are difficult to use. Improper use can adversely affect the therapeutic benefit and physician acceptance of the product.

These disadvantages are significantly challenging for the management of SSIs, where the controlled and prolonged local delivery of a drug is likely to be more effective in preventing and managing an infection than a release profile of an initial high burst of drug over a shorter duration. While we believe that localized drug delivery systems are well suited for the management of SSIs, it is important for these systems to overcome these limitations in order to change the treatment paradigm for infection management.

These limitations are particularly problematic in treating infection caused by bacteria that are resistant to currently available treatments, such as *methicillin-resistant Staphylococcus aureus*, or MRSA. The inability to generate a sufficiently high local concentration of a drug for an extended period of time limits the drug's effectiveness in treating antibiotic-resistant bacterial infections.

**Our Solution: PLEX Technology**

Our PLEX technology is designed to overcome the limitations of both systemic administration and current localized delivery systems. PLEX consists of a proprietary matrix composed of chemically-inactive and biocompatible polymers and lipids layers, which create a protective reservoir that securely encapsulates the active medication between the layers. The technology is designed to enable localized drug delivery at customizable, predetermined release rates and durations directly at the target site over periods ranging from several days to several months. Medications stored between the PLEX matrix layers are released over time in a controlled manner and in customizable, predetermined amounts by the gradual disintegration of the layers, from the outer layer to the inner layers. PLEX is designed to protect the embedded drug from the body's natural hydration and enzymes that would otherwise degrade or alter the underlying drug. Over time, natural hydration in the body disintegrates the outer layers of PLEX, which triggers release of the drug in an unmodified active form, similar to continuous direct administration, as illustrated below:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp; ![](image_003.jpg) | &nbsp;&nbsp; ![](image_004.jpg) | &nbsp;&nbsp; ![](image_005.jpg) |
| &nbsp;&nbsp;*Drug molecules are embedded within the alternating polymer-lipid layers.* | &nbsp;&nbsp;*Body moisture activates the platform, triggering controlled surface degradation of the polymer-lipid matrix and constant, linear drug release.* | &nbsp;&nbsp;*Release is sustained and customizable for days to weeks.* |

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We believe PLEX has a number of key design benefits:

●  ***Constant, predetermined drug release rates over prolonged periods.*** PLEX enables the pre-designed constant local release of active medication over a customizable, predetermined period to optimize the drug's clinical impact. This localized, targeted delivery is designed to generate effective and non-toxic concentration of the medications to reach clinical benefits not attainable by the systemic route. The release rate and period can be customized to range from a few days to several months based on the number of layers and their disintegration rate.

●  ***Direct access to, and penetration of, difficult-to-reach tissue.*** Application of our PLEX product candidates may provide long lasting treatment even in challenging medical conditions or in tissues that are not easily or safely accessible using systemic or topical modalities. This includes surgical sites or other tissues with limited or interrupted blood supply.

●  ***Anchored to the treatment site.*** Due to their particle mass, our product PLEX based candidates remain anchored at the intended treatment site and have not been observed to move or migrate once applied.

●  ***Potential for improved drug safety profile.*** Our PLEX product candidates use only a fraction of the drug required in systemic administrations of currently marketed therapies. Furthermore, the drugs in PLEX based products are physically embedded to minimize their exposure to body fluids. Through controlled release, PLEX is designed to generate local drug concentrations that are therapeutically effective but not toxic.

●  ***No chemical modification required to the embedded drug.*** PLEX embedding does not require any chemical modifications to the drug, which we believe will streamline our development process by allowing us to rely in part on prior studies of safety and efficacy and maintain the already proven mechanism of action.

●  ***Biocompatible.*** The PLEX matrix gradually disintegrates in the body at predetermined rates, eliminating the need for additional medical procedures to remove the medication reservoir once depleted.

●  ***Easy to use.*** D-PLEX<sub>100 </sub>is supplied as a sterile powder that can be administered locally as a powder or paste during surgery directly to a variety of tissues and solid organs, as illustrated below. No additional training is required for the surgeon or medical provider.

![](image_006.jpg)

●  ***Broad potential applicability.*** Because PLEX is designed to be agnostic to the nature and size of the underlying drug, and no chemical bonds develop between the embedded medication and the PLEX components, we believe PLEX can be used for the improvement of a wide variety of medicines, including small molecules, peptides, proteins and nucleic acids-based drugs. In our research and development programs, we have paired PLEX with small molecules, proteins, antibodies, peptides and nucleic acids-based drugs.

●  ***Efficient and scalable manufacturing process.*** Our PLEX product candidates are manufactured using a scalable process with well-defined operations. We believe that this highly specialized and precisely controlled manufacturing process enables us to manufacture product candidates reproducibly and efficiently for clinical and commercial applications.

**Benefits of D-PLEX for the Prevention of SSIs**

D-PLEX<sub>100</sub> was specifically designed to overcome the limitations of systemic antibiotic prophylaxis. Surgical incisions disrupt blood flow, preventing systemically administered antibiotics from achieving effective concentrations at the surgical site. D-PLEX<sub>100</sub> bypasses this limitation by delivering broad spectrum antibiotic protection directly where care begins.

Indeed, by combining PLEX with doxycycline, an FDA-approved antibiotic with over 50 years of safe global use and inclusion on the WHO Essential Medicines List, D-PLEX<sub>100</sub> provides continuous, controlled antibiotic release for 30 days, covering the full recovery risk period, and has the potential to overcome the limitations of systemic antibiotic prophylaxis and deliver significant advantages in the prevention of SSIs.

In the SHIELD II trial, D-PLEX<sub>100</sub> successfully reduced by 60% both deep and superficial SSI compared to SoC alone. By preventing infections before they take hold and reducing their severity when they do D-PLEX<sub>100</sub> potentially removes one of the most significant barriers to surgical recovery. The result is fewer complications, fewer hospitalization days, fewer readmissions and potentially faster, more predictable recovery. D-PLEX<sub>100</sub> empowers surgeons, liberates patients from preventable setbacks, and can potentially deliver meaningful efficiency gains across healthcare systems.

D-PLEX<sub>100</sub> does not replace the standard of care it elevates it. By adding a focused, localized layer of protection at the incision site, D-PLEX<sub>100</sub> complements systemic antibiotics and closes a critical gap in SSI prevention.

**The Burdens of SSIs**

HAIs are infections that patients acquire when receiving medical treatment in a healthcare facility. According to the WHO, HAIs are the most frequent adverse event affecting patient safety worldwide. SSIs are the most common HAI in the United States and occur in approximately 2% to 4% of all patients undergoing inpatient surgery despite accepted antibiotic strategies intended to prevent infection. However, these figures are likely underestimated for a number of reasons, including surgeon underreporting and negative reimbursement implications, and because approximately 50% of SSIs become evident only after a patient has been discharged. Further, the incidence and morbidity of SSIs may differ based on the surgical procedure performed and underlying patient risk factors, with for instance high SSI rates in abdominal colorectal surgeries.

SSIs prolong patient recovery and cause a substantial increase in the clinical and economic burdens of surgery, due to longer hospital stays, as well as increased costs related to diagnostic tests and management of the infection. Certain patients may require readmission, subsequent surgeries and other interventions, as well as further outpatient care, due to SSIs. According to the CDC, SSIs account for an estimated $10 billion of incremental hospital costs per year in the United States. Directly attributable costs of SSIs range from approximately $11,000 to $26,000 per infection. In more complex infections involving a prosthetic joint or an antimicrobial-resistant organism, the costs per case can exceed $90,000. SSIs are associated with approximately seven to eleven additional post-operative hospital days, and patients with an SSI have a two to eleven times increased risk of death compared to infection-free patients. Following discharge from the hospital, SSI patients may also require healthcare from other community care services, further contributing to the overall economic burden of the infection. The CDC estimates that the financial costs of treating SSIs will continue to increase, both because more surgeries are being performed and because surgical patients present with increasingly complex comorbidities. Moreover, in the United States, CMS tracks SSI rates, particularly those following hysterectomies and colorectal resection surgeries, and are increasingly using these statistics to reduce total annual CMS payments for hospitals that CMS deems to not meet certain quality metrics for the prevention of infection. CMS also publishes the SSI incidence rate for hospitals, and, consequently, hospitals have economic and reputational, in addition to clinical, incentives to prevent SSIs.

Despite the high incidence of SSIs, a large proportion of SSIs are estimated to be preventable with the use of evidence-based measures. Still, the prevention of SSIs is complex and requires the implementation of a large range of prevention and treatment approaches before, during and after surgery, which renders it difficult to apply in practice. Most significantly, the CDC, WHO and other health organizations recommend the use of prophylactic systemic antibiotics prior to surgery to help prevent SSIs; however, SSIs remain a substantial cause of morbidity, prolonged hospitalization, and mortality. Prophylactic systemic antibiotics also comes with the risk of further development of antibiotic-resistant bacteria. Prophylactic systemic antibiotics may provide adequate serum and tissue concentrations to protect from microbial contamination during the intraoperative period but have limited local bioavailability at the target tissue after the skin incision is closed. Attempts to prolong systemic antibiotic exposure after surgical closure via repeated dosing are ineffective and have been associated with increased adverse events. This is likely due to a combination of vasoconstriction, thrombosis, and the inflammatory response at the wound site, which altogether lead to wound tissue isolation from the vascular system and render additional systemic antibiotics ineffective. An alternative approach may be administering antibiotics locally, which can be released directly at the surgical site for a prolonged period, just before incision closure in the operating room.

**Health Economic Benefits of D-PLEX<sub>100 </sub>**

We believe that D-PLEX<sub>100</sub>, if approved, may provide significant health economic benefits that play an important role in formulary decision making. Members of our management team have experience in applying health economic outcomes research to support the launch of successful commercial products. The goal is to work directly with hospital customers, group purchasing organizations, integrated health networks, third-party payors, quality improvement organizations and key opinion leaders in the field of SSI prevention to deliver data showing the potential for demonstrable pharmacoeconomic benefits from the use of D-PLEX<sub>100</sub>, if approved.

Reimbursement for surgical procedures is typically capitated or fixed by third-party payors based on the specific surgical procedure performed. However, for many patients undergoing high-risk surgeries or those with co-morbidities, the incidence of SSIs remains high, potentially leading to significant healthcare cost burdens relative to the capitated reimbursement related to prolonged lengths of stay in the hospital, readmissions and additional surgical procedures and other interventions due to the infection. In addition to the direct cost of SSIs, the prolonged length of stay impacts the hospital's capacity and its ability to admit new patients. Furthermore, hospitals continue to focus on quality improvements to reduce SSIs to support optimal reimbursement and reduced penalties under CMS initiatives, such as the Hospital Acquired Condition Reduction Program, Hospital Readmission Reduction Program and the Hospital Value-Based Purchasing Program. Following discharge from the hospital, patients with an SSI may also rely on healthcare from other community care services, which further contributes to the overall economic burden of the infection. In addition, we believe that there may be opportunities for reimbursement for D-PLEX<sub>100 </sub>under CMS's NTAP program.

D-PLEX<sub>100 </sub>is designed to be applied directly to the surgical site during the initial surgery and is intended to prevent SSIs and improve associated mortality and morbidity, with potential broader healthcare economic benefits by reducing lengths of stay in the hospital, readmissions and additional surgical and other interventions.

For example, in our Phase 1b/2 clinical trial of D-PLEX<sub>100</sub> for the prevention of sternal SSIs after cardiac surgery, we observed that patients treated with D-PLEX<sub>100</sub> plus the SoC had a 67% reduction in sternal wound discharge within 90 days post-surgery, as compared to the control arm. We also conducted a post-hoc analysis, which showed an 85% reduction in patients who were treated with intravenous antibiotics due to sternum wound discharge within 90 days post-surgery, as compared to the control arm.

Our SHIELD II phase 3 trial evaluated health economic outcomes in order to generate further evidence to potentially support approval by the FDA and EMA and, if D-PLEX<sub>100 </sub>is approved, broad adoption among healthcare providers and third-party payors. We intend to further support any such data with publications and post-marketing studies.

**Our D-PLEX<sub>100 </sub>Market Opportunity**

We are initially focused on developing D-PLEX<sub>100</sub> for the prevention of SSIs, where we believe there is a high unmet medical need, especially in surgeries that are at high-risk for infection or infection-related complications.

***SSIs in Soft Tissue Surgeries***

SSIs are one of the most frequent complications in abdominal surgeries, and they represent a significant cause of mortality and morbidity. SSIs occur in approximately 5% to 30% of soft tissue surgeries, including approximately 10% to 15% of open abdominal surgeries, which represent the majority of the "Selected Gastrointestinal Surgeries" below. Patients undergoing colorectal surgeries are at particularly high risk of developing SSIs because of the high risk of additional bacterial contamination originating from the operated gastrointestinal organs. Abdominal SSIs are associated with an average of 7-11 additional post-operative hospital days. Patients undergoing abdominal surgery and that are subjected to an SSI are at greater risk of additional complications such as hernias, which can significantly affect health outcomes and require additional corrective surgery.

The table below provides the estimated sizes of our soft tissue surgery addressable market opportunity in selected gastrointestinal surgeries and selected gynecological and urologic surgeries in the United States and the EU-5, which, for purposes of the following data, includes France, Germany, Italy, Spain and the United Kingdom based on the number of procedures performed in 2019 according to IQVIA database as well as the rest of the world, or ROW, which, for purposes of the following data, includes India, China, Brazil and Japan, based on the number of procedures performed in 2017, according to a study we commissioned from Life Science Intelligence, Inc.

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| | |
|:---|:---|
|  | **Number of<br> Surgeries** |
| *Selected Gastrointestinal Surgeries* |  |
| &nbsp;&nbsp;&nbsp;United States (2019) | 4420605 |
| &nbsp;&nbsp;&nbsp;EU-5 (2019) | 3110556 |
| &nbsp;&nbsp;&nbsp;ROW (2017) | 4789800 |
| *Total Gastrointestinal Surgeries* | 12320961 |
| *Selected Gynecological and Urologic Surgeries* |  |
| &nbsp;&nbsp;&nbsp;United States (2019) | 2445405 |
| &nbsp;&nbsp;&nbsp;EU-5 (2019) | 1022218 |
| &nbsp;&nbsp;&nbsp;ROW (2017) | 827200 |
| *Total Gynecological and Urologic Surgeries* | 4294823 |

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 ****

***SSIs in Bone Surgeries***

In the context of cardiac surgeries, SSIs can occur in 5% to 8% of procedures but carry a mortality rate of up to 40% for deep sternal wound infections, which are more difficult to treat than superficial infections. Deep sternal wound SSIs are associated with an average of 35 post-operative hospital days, compared with a mean of 11 days for infection-free patients. The cost of care for a patient that develops a deep sternal wound SSI can be as much as three times greater than the cost of care for an infection-free patient.

In the context of orthopedic surgeries, SSIs can occur in 0.5% to 4.0% of primary hip, knee and spine surgery and in 10% to 15% of general trauma and open fracture surgery. Orthopedic SSIs are difficult to treat and associated with lifelong infection recurrence risk of 10% to 20%, including MRSA infections. Further, bone healing may also be impaired, which can result in disabling complications, including amputation. Orthopedic SSIs have been estimated to prolong total hospital stay by a median of two weeks per patient, approximately double readmission rates and increase healthcare costs by more than 300% compared to infection-free patients.

The table below provides the estimated sizes of our bone surgery addressable market opportunity in open heart surgeries and selected orthopedic surgeries, including both primary and revision knee and hip replacements, open fractures and spine fusions, in the United States and the EU-5 based on the number of procedures performed in 2019 according to IQVIA database as well as the ROW, based on the number of procedures performed in 2017, according to a study we commissioned from Life Science Intelligence, Inc.

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| | |
|:---|:---|
|  | **Number of<br> Surgeries** |
| *Open Sternum Surgeries* |  |
| &nbsp;&nbsp;&nbsp;United States (2019) | 474968 |
| &nbsp;&nbsp;&nbsp;EU-5 (2019) | 346331 |
| &nbsp;&nbsp;&nbsp;ROW (2017) | 441000 |
| *Total Sternum Surgeries* | 1262299 |
| *Selected Orthopedic Surgeries* |  |
| &nbsp;&nbsp;&nbsp;United States (2019) | 4824213 |
| &nbsp;&nbsp;&nbsp;EU-5 (2019) | 4278020 |
| &nbsp;&nbsp;&nbsp;ROW (2017) | 3922000 |
| &nbsp;&nbsp;&nbsp;*Total Orthopedic Surgeries* | 13024213 |
| **TOTAL D-PLEX<sub>100</sub> global addressable market** | **30902296** |

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**Clinical Development of D-PLEX<sub>100 </sub>**

***Key Completed Clinical Trials of D-PLEX<sub>100</sub> for the Prevention of SSIs in Abdominal Surgery***

 

***Positive Topline Results from Pivotal SHIELD II Phase 3 Trial of D-PLEX<sub>100</sub> for the Prevention of SSIs in Patients Undergoing Abdominal Colorectal Surgery with Large Incisions***

 ****

In June 2025, we announced positive topline results from our pivotal SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions.

Key findings from SHIELD II study include:

● The primary efficacy endpoint of the study was successfully met, with a significantly lower proportion of primary endpoint events among patients who received D-PLEX<sub>100</sub> plus SoC (n=405; 10.9%), compared to SoC alone (n=393; 18.1%), representing a 40% reduction (p<0.005). The primary endpoint is the combination of deep and superficial SSIs, all-cause mortality and surgical reinterventions at the same incision of the original index surgery.

● SHIELD II included three key secondary endpoints:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o The first key secondary endpoint was met, with a 60% reduction in deep and superficial SSI rates among
patients who received D-PLEX<sub>100</sub> plus SoC (3.8%) compared to those who received SoC alone (9.5%) (p<0.005), including
a significant reduction in deep SSIs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o The second key secondary endpoint showed statistical significance in favor of D-PLEX<sub>100</sub> plus
SoC over SoC alone (p<0.005). This efficacy endpoint combined SSI, mortality and reintervention as evaluated in the primary endpoint.
This endpoint was assessed in the overall study population of 975 patients with an incision ≥7 cm, including laparoscopic surgery
patients enrolled prior to the 2023 trial protocol change.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o The third key secondary endpoint was met with a 62% reduction of patients with an ASEPSIS<sup>1</sup> score
>20 in D-PLEX<sub>100</sub> plus SoC arm compared to SoC alone arm (p<0.05). The ASEPSIS score is a clinical tool used to objectively
assess surgical wound infections.

SHIELD II trial revealed a good safety profile with no difference in serious treatment-emergent adverse events between patients treated with D-PLEX₁₀₀ arm versus standard of care arm.

*Image: SHIELD II Results*

**Future Development**

Our PLEX platform technology may have broad applications for other localized medical conditions other than the prevention of SSIs. We have conducted research and development for our PLEX platform in a variety of potential indications, including for the treatment of infection, cancer, inflammation and pain. For example, in July 2025 we unveiled our long-acting GLP-1 receptor agonists (glucagon-like peptide-1 RA) delivery platform which aims to subcutaneously release GLP-1 RA for approximately 60 days, significantly longer than current weekly injection regimens. The platform releases GLP-1 in a linear way, potentially overcoming the burst release seen with the current weekly delivered molecules.

Our pipeline includes an early-stage oncology program, OncoPLEX, our lead intra-tumoral cancer therapy drug candidate which can potentially provide controlled local exposure to docetaxel, one of the most widely used chemotherapy agents, directly at the tumor site for several weeks to potentially reduce local tumor reoccurrence, the potential spreading of cancer cells, and ultimately improve the overall survival rate of cancer patients. OncoPLEX has been evaluated successfully in nine various animal tumor models, both as adjuvant and neoadjuvant, including murine colon carcinoma, melanoma and glioblastoma animal models.

We conducted in November 2021 a successful Pre-IND meeting with the FDA supporting a Phase 1/2 clinical trial of OncoPLEX as a potential part of first-line combination therapy for patients newly diagnosed with GBM.

 ****

***PLEX for Other Applications***

In our research and development programs, we have paired PLEX with small molecules, proteins, antibodies, peptides and nucleic acids-based drugs. We continue to evaluate these research and development programs for potential development by us or in collaboration with leading biopharmaceutical companies.

For example, in December 2024 we announced a new research and development collaboration with ImmunoGenesis. The collaboration focuses on the development of novel formulations utilizing our experience with our proprietary PLEX Technology and ImmunoGenesis' potent STING agonist drug candidate to potentially enhance treatment for solid tumors. The collaboration aims to address challenges of potent STING agonists which are susceptible to rapid clearance when administered intratumorally, limiting the exposure time within the tumor microenvironment for effective anti-tumor activity.

***Regulatory Developments***

On December 3, 2025, we announced positive FDA pre-NDA meeting minutes for D-PLEX₁₀₀ supporting an NDA submission. We expect to submit an NDA on a rolling basis beginning by the end of the first quarter of 2026 leveraging our Fast Track and Breakthrough Therapy designations.

We intend to pursue a broad label for D-PLEX<sub>100</sub> for the prevention of SSIs, the scope of which will depend on the clinical data generated from our Phase 3 clinical trials and discussions with the FDA and the EMA.

We intend to seek approval of D-PLEX<sub>100</sub> under Section 505(b)(2) of the FFDCA, which provides an abbreviated pathway for marketing approval by the FDA in the United States, and will seek approval under the comparable hybrid application pathway in the EU. Such abbreviated approval pathways may not lead to a faster development or review process compared to traditional approval pathways and do not increase the likelihood that D-PLEX<sub>100</sub> will receive regulatory approval in the United States or the EU.

We received three QIDP designations from the FDA for D-PLEX<sub>100</sub> for the prevention of post-abdominal surgery incisional infection, for the prevention of sternal wound infection post-cardiac surgery, and for prevention of post-colorectal SSIs. The QIDP designation from the FDA confers, among other benefits, a five-year extension to any period of non-patent exclusivity awarded upon approval, such as a three-year period of exclusivity for new clinical investigations of previously approved products, which we expect for D-PLEX<sub>100</sub>, if approved. Additionally, in November 2018 we received Fast Track Designation from the FDA for D-PLEX<sub>100</sub> for topical use for the prevention of sternal infections post-cardiac surgery, in July 2020, for the prevention of post-abdominal surgery incisional infections and in September 2021 for prevention of post-colorectal SSIs. Fast Track Designation could potentially expedite the FDA's review of D-PLEX<sub>100</sub> and enables early and frequent communication with the FDA as we continue to generate data from our ongoing and planned clinical trials. In November 2020, we received breakthrough therapy designation from the FDA for the prevention of SSIs in patients undergoing elective colorectal surgery based on the clinical results of our Phase 2 trial. The breakthrough therapy designation is granted based on preliminary clinical evidence indicating that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The breakthrough therapy designation is designed to expedite the development and review of drugs that are intended to treat a serious or life-threatening condition so patients may have access to therapies through the FDA approval as soon as possible. The breakthrough therapy designation allows for frequent discussions with the FDA and ensures that a dedicated senior team from the FDA reviews our product filling.

In September 2022, we received confirmation from the EMA which was reconfirmed in December 2025, that D-PLEX<sub>100 </sub>is eligible for submission of a MAA in the EU under the EMA's centralized procedure. The centralized process eligibility is granted to D-PLEX<sub>100 </sub>under the Therapeutic Innovation criteria which underscores that D-PLEX<sub>100 </sub>potentially provides a new alternative to patients in preventing post abdominal SSIs.

**Competition**

The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Our potential competitors include large and experienced companies that have significant competitive advantages over us, such as greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition, and more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities. These companies may develop new drugs to treat the indications that we target or seek to have existing drugs approved for use in the indications that we target.

These potential competitors may therefore introduce competing products without our prior knowledge and without our ability to take preemptive measures in anticipation of their commercial launch. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in this industry. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective, easier to administer or less costly than our product candidates.

The current SoC for preventing SSIs involves the implementation of a range of treatment and prevention measures before, during and after surgery, including prophylactic antibiotic administration, antiseptic measures and wound care. We anticipate that D-PLEX<sub>100</sub>, if approved, could be used as a complementary part of many surgical protocols, rather than competitive, in addition to the current SoC for the prevention of SSIs. In addition, we are aware of other approved treatments that can be applied locally during or after surgery for the prevention of SSIs, including triclosan-coated antiseptic sutures, negative wound pressure therapy, the CleanCision wound retraction and protection system and a resorbable gentamicin-collagen sponge, which is approved in the EU and Canada. In orthopedic surgeries, we are aware of approved treatments for localized SSI prevention that pair bone cement or bone graft substitutes premixed with an antibiotic as developed by companies such as BoneSupport AB (STO: BONEX).

**Manufacturing**

Our PLEX product candidates are manufactured using a scalable self-assembly process with well-defined operations. This highly specialized and precisely controlled process enables us to manufacture product candidates consistently and efficiently for clinical and commercial applications. We have constructed a state-of-the-art, sterile manufacturing facility that is designed to be cGMP compliant for the production of our product candidates adjacent to our administrative headquarters in Petach Tikva, Israel. The manufacturing facility is cGMP certified by the IMOH and inspected by a European Union-qualified person, enabling cGMP manufacturing of D-PLEX<sub>100</sub> for our future clinical trials of D-PLEX<sub>100 </sub>as well as for initial commercial demand if D-PLEX<sub>100</sub> is approved.

We estimate that our facility will meet commercial demand for at least the first 48 months following a commercial launch of D-PLEX<sub>100</sub>, if approved. We intend to use this capacity as the basis to build a fully integrated biopharmaceutical company, supported by our in-house research and development team and our anticipated commercial infrastructure. We have already started planning expansion of our manufacturing capabilities or employment of third-party contract manufacturing organizations to meet further commercial demand in the future.

In September 2023, the IMOH completed a GMP audit of our manufacturing facility without any critical or major findings and in September 2025, we announced the successful completion of an additional GMP audit by the IMOH. The audits were conducted as part of IMOH's routine evaluation of our manufacturing process for D-PLEX<sub>100</sub>. The audits concluded that our manufacturing facility, process and quality system conform to the requirements of cGMP for medicinal products. These audits are also valid for Europe under the provisions of the ACAA between the EU and Israel.

Additionally, we rely on third parties as needed for the supply of certain raw materials necessary to manufacture our product candidates.

**Marketing, Sales and Distribution**

Given our current stage of development, we have limited internal marketing, sales and distribution capabilities. We have established a wholly-owned United States subsidiary, PolyPid Inc., a Delaware corporation with an office in New Jersey, to support our potential commercialization and business development efforts in the United States and our clinical development program. If approved, we intend to launch D-PLEX<sub>100</sub>, and other future product candidates worldwide through commercial partnerships, as we did with the agreement signed with Advanz in August 2022 for the exclusive license, distribution and supply of D-PLEX<sub>100</sub> in the EEA and the United Kingdom, as elaborated below. We believe that partnering with leading pharmaceutical companies focusing on hospital business, with U.S. as a priority, will be instrumental to maximize our commercial success and launch of D-PLEX<sub>100</sub>. In the United States, we believe that the cost-effectiveness and potential clinical benefits of D-PLEX<sub>100</sub> will support its commercial launch under existing Medicare rates given the associated morbidity and cost burden of SSIs and the associated penalties imposed on hospital reimbursement from the CMS. In addition, we believe that there may be opportunities for reimbursement for D-PLEX<sub>100</sub> under CMS's New Technology Add-on Payment program.

On August 2, 2022, we entered into a license, distribution and supply agreement with Advanz, pursuant to which we granted the exclusive right to Advanz to market, advertise, promote, distribute, offer for sale, sell and import our product D-PLEX<sub>100</sub> for the prevention of (i) post abdominal surgery incisional infection and/or (ii) post cardiac surgery sternal infection in the EEA and the United Kingdom. The term of the license is until the later of December 31, 2035, or 10 years after the first commercial sale of D-PLEX<sub>100</sub>. The license is also terminable by either party under certain limited circumstances.

In addition, we may out-license some or all of our patent rights to more than one party to achieve the fullest development, marketing and distribution of any products we develop.

**Intellectual Property**

Our patent estate includes patents and patent applications with claims directed to our PLEX technology platform, D-PLEX<sub>100</sub> product candidate and claims for potential future product candidates. As of February 25, 2026, our patent estate includes 157 issued patents, including utility and composition of matter patents, one allowed patent application and 18 pending patent applications for our product candidates and methods of treatment.

Our patents and patent applications primarily relate to a polymer-lipid-based platform for sustained release of an active pharmaceutical agent at a target site. We have 36 issued patents in various countries worldwide related to compositions for sustained release of an API, including a lipid-saturated matrix formed from a biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 18 issued patents in various countries worldwide related to compositions for sustained release of an API including a lipid-saturated matrix formed from a non-biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 12 issued patents in various countries worldwide related to compositions for sustained release of a nucleic agent including a lipid-saturated matrix formed from a biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have an issued Australian patent related to compositions for sustained release of peptidic molecules, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 26 issued patents and one pending patent application in various countries worldwide related to methods for treating bone fractures through the use of biocompatible fillers coated with sustained release antibiotic compositions, along with 17 issued patents in various countries worldwide related to methods for treating peri-implantitis and 47 issued patents, one allowed patent application and four pending patent applications in various countries worldwide related to methods for preventing and treating SSIs through similar processes. We also have 13 pending patent applications related to compositions and methods for the treatment of solid tumors. Our patent estate includes 12 issued United States patents as well as issued patents and/or pending patent applications in Australia, Brazil, Canada, China, the Eurasian Patent Organization, the European Patent Office, Hong-Kong, India, Israel, Japan, Mexico, New Zealand, the Philippines, Singapore, South Africa, South Korea, Thailand and the United States. Our issued patents are expected to remain in effect between 2029 and 2035.

In addition to patents, we have nine registered trademarks. "BonyPid" is registered in the European Union Intellectual Property Office and in Israel. "PolyPid" is registered in the United States, Israel, China and in the following European Union countries: Benelux, France, Germany, Spain, Austria, Italy, the United Kingdom, Ireland and Portugal, and is pending in Canada."![](image_008.jpg)" is registered in Israel, "![](image_009.jpg)" is pending in Israel, "Bacfenssi" is registered in the United States, the European Union Intellectual Property Office, Great Britain, Switzerland, Iceland, Liechtenstein, Norway, China, Israel and Russia, and is pending in Canada. "Opzifend" which is registered in the United States, the European Union Intellectual Property Office, Great Britain, Switzerland, Iceland, Liechtenstein, Norway, China, Israel and Russia. "Ssisurg", "Elyfssi" and "Bacyssio" are registered in Israel. "Baczenssi" which is registered in the European Union Intellectual Property Office and in Great Britain. Furthermore, we rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position.

Preparing and filing patent applications is a joint endeavor of our research and development team and our in-house and external patent attorneys. Our patent attorneys conduct patent prior-art searches and then analyze the data in order to provide our research and development team with recommendations on a routine basis. This results in:

● protecting our product candidates that are under development;

● encouraging pharmaceutical companies to negotiate development agreements with us; and

● preventing competitors from attempting to design-around our inventions.

We initially submit applications to the USPTO as provisional patent applications. Then typically we continue by filing non-provisional patent applications under the PCT, which is an international patent law treaty that provides a unified procedure for filing a single initial patent application to later seek patent protection for an invention in any number of the member states of the PCT. Although a PCT application does not itself issue as a patent, it acts as a placeholder allowing the applicant to seek protection in any of the member states through national-phase applications.

**Government Regulation**

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacturing and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, packaging, recordkeeping, tracking, approval, import, export, distribution, advertising and promotion of our products.

***U.S. Government Regulation of Drug Products***

In the United States, the FDA regulates drugs under the FFDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

● nonclinical laboratory and animal tests that must be conducted in accordance with good laboratory practices;

● submission of an IND, which must become effective before clinical trials may begin;

● approval by an independent institutional review board, or IRB, for each clinical site or centrally before each trial may be initiated;

● adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended use, performed in accordance with good clinical practices, or GCPs;

● submission to the FDA of an NDA and payment of user fees;

● satisfactory completion of an FDA advisory committee review, if applicable;

● pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with cGMP and GCPs;

● satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

● FDA approval of an NDA to permit commercial marketing for particular indications for use; and

● compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

The testing and approval process requires substantial time, effort and financial resources. Preclinical studies include laboratory evaluation of drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as animal studies to assess potential safety and efficacy. Prior to commencing the first clinical trial with a product candidate, we must submit the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical studies may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial.

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development, as well as amendments to previously submitted clinical trials. Further, an independent IRB for each study site proposing to conduct the clinical trial must review and approve the plan for any clinical trial, its informed consent form and other communications to study subjects before the clinical trial commences at that site. The IRB must continue to oversee the clinical trial while it is being conducted, including any changes to the study plans.

Regulatory authorities, an IRB or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk, the clinical trial is not being conducted in accordance with the FDA's or the IRB's requirements, if the drug has been associated with unexpected serious harm to subjects, or based on evolving business objectives or competitive climate. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may advise us to halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

● Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, structure-activity relationships, mechanism of action, absorption, metabolism, distribution and excretion in healthy volunteers or subjects with the target disease or condition. If possible, Phase 1 clinical trials may also be used to gain an initial indication of product effectiveness.

● Phase 2—Controlled studies are conducted with groups of subjects with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule and expanded evidence of safety. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expansive Phase 3 clinical trials.

● Phase 3—These clinical trials are undertaken in larger subject populations to provide statistically significant evidence of clinical efficacy and to further test for safety in an expanded subject population at multiple clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. These clinical trials may be done globally to support global registrations so long as the global sites are also representative of the U.S. population and the conduct of the study at global sites comports with FDA regulations and guidance, such as compliance with GCPs.

The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information.

Clinical trials must be conducted under the supervision of qualified investigators in accordance with GCP requirements, which includes the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, and the review and approval of the study by an IRB. Investigators must also provide information to the clinical trial sponsors to allow the sponsors to make specified financial disclosures to the FDA. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the trial procedures, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated and a statistical analysis plan. Information about some clinical trials, including a description of the trial and trial results, must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FFDCA. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and the IRB and more frequently if serious adverse effects occur.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

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***Orange Book Listing***

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA patents whose claims cover the applicant's product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book.

Any applicant who files a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA (1) that no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) that such patent has expired; (3) the date on which such patent expires; or (4) that such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification. Generally, the 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the 505(b)(2) NDA applicant challenges a listed patent through a Paragraph IV certification.

If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the holder of the NDA for the reference listed drug and the patent owner once the application has been accepted for filing by the FDA. The applicant may also elect to submit a "section viii" statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit, a decision in the infringement case that is favorable to the applicant or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where a 505(b)(2) NDA applicant files a Paragraph IV certification, the NDA holder or patent owner regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of a 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

***Exclusivity***

The FDA provides periods of non-patent regulatory exclusivity, which provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug for a period of three or five years following the FDA's approval of the NDA. Five years of exclusivity are available to new chemical entities, or NCEs. An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent, or not involving the sharing of electron pairs between atoms, derivatives, such as a complex (*i.e.*, formed by the chemical interaction of two compounds), chelate (*i.e.*, a chemical compound), or clathrate (*i.e.*, a polymer framework that traps molecules), of the molecule, responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review or approve an Abbreviated New Drug Application, or ANDA, or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.

If a product is not eligible for the NCE exclusivity, it may be eligible for three years of exclusivity. Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the particular condition of the new drug's approval or the change to a marketed product, such as a new formulation for a previously approved drug. Five-year and three-year exclusivity will not delay the submission or approval of a 505(b)(1) NDA; however, an applicant submitting a 505(b)(1) NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.

In addition, under the GAIN Act, which was enacted as part of the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law in July 2012, the FDA may designate a product as a QIDP. In order to receive this designation, a drug must qualify as an antibiotic or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibiotic or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called "qualifying pathogen" found on a list of potentially dangerous, drug-resistant organisms to established and maintained by the FDA. A sponsor must request such designation before submitting a marketing application. We obtained QIDP designations for D-PLEX<sub>100 </sub>for the prevention of post-abdominal surgery incisional infection, for the prevention of post-cardiac surgery sternal infection and for prevention of post-colorectal SSIs. Upon approving a marketing application for a QIDP-designated product, the FDA will extend by an additional five years any non-patent marketing exclusivity period awarded, such as a three-year exclusivity period awarded for new clinical investigations of previously approved products. This extension is in addition to any pediatric exclusivity extension awarded, and the extension will be awarded only to a drug first approved on or after the date of enactment of the GAIN Act. The GAIN Act prohibits the grant of an exclusivity extension where the application is a supplement to an application for which an extension is in effect or has expired, is a subsequent application for a specified change to an approved product, or is an application for a product that does not meet the definition of QIDP based on the uses for which it is ultimately approved.

***Hatch Waxman Amendments and the 505(b)(2) Regulatory Approval Process***

Section 505 of the FFDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy, but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA's prior findings of safety and efficacy for an existing product, or published literature, in support of its application. Specifically, the applicant may rely upon the FDA's prior findings of safety and efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2) NDA. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant. Lastly, the FDA permits marketing applications through Section 505(j), which establishes an abbreviated approval process for a generic version of approved drug products through the submission of an ANDA.

An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. ANDAs are termed "abbreviated" because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

***Special FDA Expedited Review and Approval Programs***

The FDA has various programs, including Fast Track Designation, breakthrough therapy designation, accelerated approval, and priority review, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

Under the fast track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate. To be eligible for a Fast Track Designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life threatening disease or condition and demonstrates the potential to address an unmet medical need, or that the drug qualifies as a QIDP under the GAIN Act. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. We obtained a Fast Track Designation in November 2018 for D-PLEX<sub>100 </sub>for the prevention of post-cardiac surgery sternal infection, in July 2020 for the prevention of post abdominal surgery incisional infection and in September 2021 for prevention of post-colorectal SSIs. Fast Track Designation provides additional opportunities for interaction with the FDA's review team and may allow for rolling review of NDA components before the completed application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. However, the FDA's time period goal for reviewing an application does not begin until the last section of the NDA is submitted. The FDA may decide to rescind the Fast Track Designation if it determines that the qualifying criteria no longer apply.

In addition, a sponsor can request breakthrough therapy designation for a drug if it is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. We obtained breakthrough therapy designation in November 2020 for D-PLEX<sub>100</sub> for the prevention of SSIs in patients undergoing elective colorectal surgery. Drugs designated as breakthrough therapies are eligible for intensive guidance from the FDA on an efficient drug development program, organizational commitment to the development and review of the product including involvement of senior managers, and, like fast track products, are also eligible for rolling review of the NDA. Both fast track and breakthrough therapy products are also eligible for accelerated approval and/or priority review, if relevant criteria are met.

Under the FDA's accelerated approval regulations, the FDA may approve a drug for a serious or life threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. A drug candidate approved on this basis is subject to rigorous post marketing compliance requirements, including the completion of Phase 4 or post approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post approval studies, or confirm a clinical benefit during post marketing studies, will allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated approval regulations are subject to prior review by the FDA.

Once an NDA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current The Prescription Drug User Fee Act, or PDUFA, guidelines. Under the current PDUFA agreement, these six and ten months review periods are measured from the 60-day filing date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review from the date of submission. Most products that are eligible for fast track breakthrough therapy designation are also likely to be considered appropriate to receive a priority review.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. In addition, the manufacturer of an investigational drug for a serious or life threatening disease is required to make available, such as by posting on its website, its policy on responding to requests for expanded access. Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

***NDA Submission and Review by the FDA***

Assuming successful completion of the required clinical and preclinical testing, among other items, the results of product development, including chemistry, manufacture and controls, nonclinical studies and clinical trials are submitted to the FDA, along with proposed labeling, as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. These user fees must be filed at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in some circumstances. One basis for a waiver of the application user fee is if the applicant employs fewer than 500 employees, including employees of affiliates, the applicant does not have an approved marketing application for a product that has been introduced or delivered for introduction into interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application.

In addition, under the Pediatric Research Equity Act, an NDA or supplement to an NDA for a new active ingredient, indication, dosage form, dosage regimen or route of administration must contain data that are adequate to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.

The FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active ingredients, that have not previously been approved by the FDA to an advisory committee or provide in an action letter a summary of the reasons for not referring it to an advisory committee. The FDA may also refer drugs which present difficult questions of safety, purity or potency to an advisory committee. An advisory committee is typically a panel that includes clinicians and other experts who review, evaluate and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCPs.

Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive review, before it accepts the application for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. The FDA's NDA review times may differ based on whether the application is a standard review or priority review application. The FDA may give a priority review designation to drugs that are intended to treat serious conditions and provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has set the review goal of 10 months from the 60-day filing date to complete its initial review of a standard NDA for a new molecular entity, or NME, and make a decision on the application. For non-NME standard applications, the FDA has set the review goal of 10 months from the date that the FDA receives the application to complete its initial review and to make a decision on the application. For priority review applications, the FDA has set the review goal of reviewing NME NDAs within six months of the 60-day filing date and non-NME applications within six months of the date that the FDA receives the application. Such deadlines are referred to as the PDUFA date. The PDUFA date is only a goal and the FDA does not always meet its PDUFA dates. The review process and the PDUFA date may also be extended if the FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding the submission.

Once the FDA's review of the application is complete, the FDA will issue either a Complete Response Letter, or CRL, or approval letter. A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing, or other information or analyses in order for the FDA to reconsider the application. The FDA has the goal of reviewing 90% of application resubmissions in either two or six months of the date that the FDA receives the application, depending on the kind of resubmission. Even with the submission of additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA's satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a REMS as a condition of approval or following approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The FDA may prevent or limit further marketing of a product, or impose additional post-marketing requirements, based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements, FDA notification and FDA review and approval. Further, should new safety information arise, additional testing, product labeling or FDA notification may be required.

If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed or may include contraindications, warnings or precautions in the product labeling, which has resulted in a Black Box warning. A Black Box warning is the strictest warning put in the labeling of prescription drugs or drug products by the FDA when there is reasonable evidence of an association of a serious hazard with the drug. The FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require Phase 4 post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-marketing studies.

***Post-approval Requirements***

Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including manufacturing, periodic reporting, product sampling and distribution, advertising, promotion, drug shortage reporting, compliance with any post-approval requirements imposed as a conditional of approval such as Phase 4 clinical trials, REMS and surveillance, recordkeeping and reporting requirements, including adverse experiences.

After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any approved products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and to list their drug products, and are subject to periodic announced and unannounced inspections by the FDA and these state agencies for compliance with cGMPs and other requirements, which impose procedural and documentation requirements upon us and our third-party manufacturers.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented, or FDA notification. FDA regulations also require investigation and correction of any deviations from cGMPs and specifications, and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in withdrawal of marketing approval, mandatory revisions to the approved labeling to add new safety information or other limitations, imposition of post-market studies or clinical trials to assess new safety risks, or imposition of distribution or other restrictions under a REMS program, among other consequences.

The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA. Physicians, in their independent professional medical judgement, may prescribe legally available products for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. We, however, are prohibited from marketing or promoting drugs for uses outside of the approved labeling.

In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. The Drug Supply Chain Security Act also imposes obligations on manufacturers of pharmaceutical products related to product and tracking and tracing.

Failure to comply with any of the FDA's requirements could result in significant adverse enforcement actions. These include a variety of administrative or judicial sanctions, such as refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, corporate integrity agreements, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and imprisonment. It is also possible that failure to comply with the FDA's requirements relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection laws. Any of these sanctions could result in adverse publicity, among other adverse consequences.

***Other Healthcare Regulations***

Our business activities, including but not limited to, research, sales, promotion, distribution, medical education and other activities are or will in the future be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including the Department of Justice, the HHS and its various divisions, including CMS, Office of Inspector General, and the Health Resources and Services Administration, the Department of Veterans Affairs, the Department of Defense and state and local governments. Our business activities must comply with numerous healthcare laws and regulations, including those described below.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for, or purchasing, leasing, ordering, or arranging for the purchase, lease or order of, any good, facility, item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other hand. The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all facts and circumstances. While we are not currently subject to the Anti-Kickback Statute because we do not yet have a commercial, reimbursable product, the relationships that we form now could in the future implicate the Anti-Kickback Statute upon attainment of coverage and reimbursement for approved products under any federal healthcare program. We therefore train and educate our personnel on the Anti-Kickback Statute and their obligations thereunder, and we endeavor to structure our financial relationships to comply with the applicable exceptions and safe harbors wherever possible. However, some of our arrangements, like many other common and non-abusive arrangements, are not covered by an applicable exception or safe harbor and therefore, could implicate the Anti-Kickback Statute in the future. Nevertheless, we do not believe them to present a significant risk to beneficiaries or federal healthcare programs and, as such, appear unlikely to invite future government scrutiny or prosecution, warrant the imposition of sanctions, or be found to violate the statute. However, we cannot offer assurance that the government or a whistleblower would agree with our position that certain arrangements fall within a safe harbor, or that arrangements that do not squarely meet an exception or safe harbor will not be found to violate the Anti-Kickback Statute. Additionally, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, amended the intent requirement of the federal Anti-Kickback Statute, and other healthcare criminal fraud statutes, so that a person or entity no longer needs to have actual knowledge of the federal Anti-Kickback Statute, or the specific intent to violate it, to have violated the statute. The ACA also provided that a violation of the federal Anti-Kickback Statute is grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act, or FCA, thereby increasing the penalty structure for these violations.

The federal civil and criminal false claims laws, including the FCA, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the U.S. federal government, including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. Whistleblower actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, even before the validity of the claim is established and even if the government decides not to intervene in the lawsuit. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free products to customers with the expectation that the customers would bill federal programs for the products; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for "off-label" uses; and submitting inflated best price information to the Medicaid Rebate Program. Companies may decide to agree to large settlements with the government and/or whistleblowers to avoid the cost, distraction and negative publicity associated with litigation.

As a condition of receiving Medicaid coverage for prescription drugs, the Medicaid Drug Rebate Program requires manufacturers to calculate and report to CMS their Average Manufacturer Price, or AMP, which is used to determine rebate payments shared between the states and the federal government and, for some multiple source drugs, Medicaid payment rates for the drug, and for drugs paid under Medicare Part B, to also calculate and report their average sales price, which is used to determine the Medicare Part B payment rate for the drug. In addition, the MDRP requires pharmaceutical manufacturers to enter into and have in effect a National Drug Rebate Agreement, or NDRA, with the Secretary of HHS as a condition for states to receive federal matching funds for the manufacturer's outpatient drugs furnished to Medicaid patients.

Drugs that are approved under a biologics license application, or BLA, or an NDA, including a 505(b)(2) NDA, are subject to an additional requirement to calculate and report the manufacturer's best price for the drug and inflation penalties which can substantially increase rebate payments. For BLA and NDA drugs, the Veterans Health Care Act requires manufacturers to calculate and report to the Department of Veterans Affairs a different price called the Non-Federal AMP, offer the drugs for sale on the Federal Supply Schedule, and charge the government no more than a statutory price referred to as the Federal Ceiling Price, which includes an inflation penalty. A separate law requires manufacturers to pay rebates on these drugs when paid by the Department of Defense under its TRICARE Retail Pharmacy Program. Knowingly submitting false pricing information to the government creates potential federal False Claims Act liability.

Our D-PLEX<sub>100</sub> product is eligible for Medicare's NTAP program as a QIDP. The NTAP program allows for additional reimbursement for new technology that is limited to the lesser of 75% of the costs of the technology, or 75% of the amount by which the costs of the case exceed the standard Medicare Severity Diagnosis Related Groups payment. The NTAP allows hospitals to bill Medicare outside of the Inpatient Prospective Payment Schedule for a temporary period. It is uncertain whether D-PLEX<sub>100</sub> will be granted NTAP status and if so, when that payment would be available. Further, the Trump Administration has made some changes to the NTAP program that while not directly affecting our products, may signal potential future revisions that may impact the NTAP process or our product's eligibility under NTAP.

While also not applicable until we have a commercial product with Medicare or Medicaid reimbursement, the CMPL authorizes the imposition of substantial civil money penalties against an entity that engages in certain prohibited activities including but not limited to violations of the Anti-Kickback Statute, knowing submission of a false or fraudulent claim, employment of an individual excluded from participation in federal healthcare programs, and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner or supplier from which to receive items or services for which payment may be made in whole or part by a federal healthcare program. Remuneration is broadly defined under the CMPL as any transfer of value, including provision of items or services for free or below fair market value. It covers direct or indirect transfers like discounts, free goods, co-pay waivers, or even "nominal" incentives, though exceptions exist for offerings that meet the Financial Need, Preventative Care, or Promoting Access to Care exceptions. Sanctions for violations of the CMPL include civil monetary penalties and administrative penalties up to and including exclusion from participation in federal health care programs.

HIPAA created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs, or integrity oversight and reporting obligations to resolve allegations of non-compliance. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Additionally, the ACA amended the intent requirement of these criminal statutes so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.

The federal Open Payments program pursuant to the Physician Payments Sunshine Act, created under Section 6002 of the ACA and its implementing regulations, requires some manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with specified exceptions) to report annually information related to specified payments or other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually specified ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties. While we are not currently subject to such reporting, we will be upon commercial product release where payment is available under federal healthcare programs.

In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information held by covered entities, their business associates and covered subcontractors. Among other things, HITECH makes HIPAA's security standards directly applicable to business associates, defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. We do not meet the definition of a covered entity under HIPAA; however, we may be considered a business associate with respect to certain interactions and relationships with our health care customers.

In addition, numerous other laws, regulations and legislative and regulatory initiatives at the U.S. federal and state levels address the privacy and security of personal information. We remain subject to federal and state privacy-related laws that may be more restrictive or contain different requirements than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties.

Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers and even self-pay patients. While these laws will not apply until we have a commercial product, our marketing and sales plans in anticipation of commercial launch will need to take these laws into consideration to ensure compliance.

We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information, state and local laws that require the registration of pharmaceutical sales representatives, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. The need to build and maintain a robust compliance program with different compliance and/or reporting requirements increases the possibility that a company may violate one or more of the requirements, resulting in fines and penalties.

Ensuring that our internal operations and business arrangements with third parties comply with current and future applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. Even absent a determination that we violated applicable healthcare laws, a government investigation or litigation would be costly, divert management's attention, and potentially harm our reputation. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

***Coverage and Reimbursement***

Our ability to commercialize any products successfully will also depend in part on the extent to which coverage and adequate reimbursement for the procedures utilizing our product candidates, performed by health care providers, once approved, will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which procedures, and the products utilized in such procedures, they will cover and establish reimbursement levels. Assuming coverage is obtained for procedures utilizing a given product, by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who undergo procedures for the treatment of their conditions, and their treating physicians, generally rely on third-party payors to reimburse all or part of the costs associated with the procedures which utilize our products. When used in connection with surgical and certain other procedures, our product candidates may not be reimbursed separately but their cost may instead be bundled as part of the payment received by the provider for the procedure only. Treating physicians are unlikely to use and order our products unless coverage is provided and the reimbursement is adequate to cover all or a significant portion of the cost of the procedures which utilize our products. A decision by a third-party payor not to cover or adequately reimburse for our product candidates or procedures using our product candidates, could reduce physician utilization of our products once approved. Therefore, coverage and adequate reimbursement for procedures which utilize new products is critical to the acceptance of such new products. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

Government authorities and other third-party payors are developing increasingly sophisticated methods of cost containment, such as including price controls, restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Government and other third-party payors are increasingly challenging the prices charged for health care products and procedures, examining the cost effectiveness of procedures, and the products used in such procedures, in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement. Further, no uniform policy requirement for coverage and reimbursement exists among third-party payors in the United States, which causes significant uncertainty related to the insurance coverage and reimbursement of newly approved products, and the procedures which may utilize such newly approved products. Therefore, coverage and reimbursement can differ significantly from payor to payor and health care provider to health care provider.

We cannot be sure that coverage and reimbursement will be available for any product that we commercialize, or the procedures which utilize such product, and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

In evaluating the adoption of products such as D-PLEX<sub>100</sub>, hospitals typically undertake a multidisciplinary review process that includes clinical leadership, pharmacy, infection prevention, and financial management. A key component of this process is review by the Pharmacy and Therapeutics, or P&T, Committee, which assesses the product's safety, efficacy, clinical differentiation, and alignment with institutional treatment protocols. P&T approval is often a prerequisite to formulary inclusion and use, and the committee may impose restrictions on use, require post-market data, or limit adoption to specific patient populations. Even following approval, uptake may be gradual as hospitals evaluate real-world clinical outcomes and operational integration.

Economic considerations play a significant role in hospital adoption decisions, particularly in the context of Diagnosis-Related Group, or DRG, reimbursement. Under the DRG system, hospitals generally receive a fixed payment for a patient episode of care, regardless of the specific products used. As a result, hospitals must evaluate whether the incremental cost of a product such as D-PLEX<sub>100</sub> can be justified within existing reimbursement frameworks, either through reduced length of stay, avoidance of complications, or decreased need for additional interventions. Products that do not have separate reimbursement may face heightened scrutiny, especially in cost-constrained environments.

***Healthcare Reform Measures***

The United States and some non-U.S. jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, the pharmaceutical industry in the United States has been affected by the passage of ACA, which, among other things: imposed new fees on entities that manufacture or import certain branded prescription drugs; expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs; implemented a licensure framework for follow-on biologic products; expanded health care fraud and abuse laws; revised the methodology by which rebates owed by manufacturers to the state and federal government under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including products that are inhaled, infused, instilled, implanted or injected; imposed an additional rebate similar to an inflation penalty on new formulations of drugs; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; expanded the 340B program which caps the price at which manufacturers can sell covered outpatient pharmaceuticals to specified hospitals, clinics and community health centers; and provided incentives to programs that increase the federal government's comparative effectiveness research. There has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. Former President Biden issued several executive orders, Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

However, 2025 saw a change in presidential administration in the United States and a transition from Democrat-led to Republican-led executive and legislative bodies, resulting in substantial changes in health policy, including through the passage of the OBBBA on July 4, 2025, a budget reconciliation bill that includes significant funding cuts to Medicaid, the Health Insurance Marketplaces, and the Medicare Physician Fee Schedule. The CBO estimates the OBBBA will reduce federal healthcare spending and lead to a 10 million increase in the U.S. uninsured population, all of which could lead to increased pricing controls and affect product demand. In addition, on May 12, 2025, the Trump Administration issued an Executive Order titled "Delivering Most-Favored Nation Prescription Drug Pricing to American Patients", outlining a plan to reduce prescription drug costs in the U.S., which was followed by formal letters to major pharmaceutical companies in July 2025 outlining steps they must take to lower prescription drug costs to American patients and taxpayers. In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products, including our product candidates. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Our results of operations could be adversely affected by health care reforms that may be adopted in the future. Similarly, we expect a shift in enforcement initiatives which introduces substantial unknowns with respect to our business operations in the United States. As such, our costs to monitor for these changes and respond to new requirements will increase.

Future actions by the President, the U.S. Congress, and the individual states could have a material adverse impact on our commercialization outlook. We cannot predict what additional new legislation, agency priorities, and rulemaking, at both the federal and state level may be on the horizon as the United States continue to reassess how it pays for healthcare. As a result, we cannot quantify or predict what impact any changes might have on our business and product candidates. However, any changes that impact coverage of our product candidates or lower reimbursement for our products could materially and adversely affect our business, financial condition and results of operations.

***The Foreign Corrupt Practices Act***

The FCPA prohibits any U.S. individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. Recent policy changes during the Trump administration emphasized a more lenient approach to enforcement of the FCPA, particularly concerning compliance and enforcement actions. These changes included a focus on reducing penalties for companies that self-disclose violations and a greater emphasis on corporate compliance programs. The administration also indicated a willingness to consider the extent and effectiveness of a company's internal controls when evaluating potential violations. Furthermore, the FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

**Non-U.S. Government Regulation**

To the extent that any of our product candidates, once approved, are sold in a country outside of the United States, we will be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

In order to market our future products in the EEA (which is comprised of the 27 Member States of the EU plus Norway, Iceland and Liechtenstein) and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

● the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use of the EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU; and

● National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

 ****

***Data and Marketing Exclusivity***

In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference product in the EU. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

***Pediatric Investigation Plan***

In the EEA, marketing authorization applications for new medicinal products not authorized have to include the results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA's Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the marketing authorization is obtained in all Member States of the EU and study results are included in the product information, even when negative, the product is eligible for six months' supplementary protection certificate extension.

**Environmental, Health and Safety Matters**

We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily Israel, governing, among other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals, air, water and ground contamination; air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage. Our operations use chemicals and produce waste materials and sewage and require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the MOH, local authorities and the municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations. These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation. If we fail to comply with such laws, regulations or permits, we may be subject to fines and other civil, administrative or criminal sanctions, including the revocation of permits and licenses necessary to continue our business activities. In addition, we may be required to pay damages or civil judgments in respect of third-party claims, including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport, manufacture or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several liability for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments could have a material adverse effect on our business, financial condition and results of operations. In addition, laws and regulations relating to environmental, health and safety matters are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance measures or to penalties for activities that were previously permitted.

**C. Organizational Structure.**

We currently have two wholly owned subsidiaries: PolyPid Inc., a Delaware corporation with an office in New Jersey, and PolyPid Pharma SRL, a company organized under the laws of Romania.

**D. Property, Plant and Equipment.**

Our principal executive offices are located at 18 Hasivim Street, Petach Tikva 4959376, Israel, where we lease an approximately 45,306 square foot facility under a lease that expires July 22, 2027. This Israeli facility houses our administrative headquarters, research and development laboratories and state-of-the-art manufacturing facility. Our monthly rent payment is NIS 280,000 (approximately $88,000).

We consider that our current office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business.

**ITEM 4A. UNRESOLVED STAFF COMMENTS**

Not applicable.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

**A. Operating Results.**

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in "Cautionary Note Regarding Forward-Looking Statements" and under "Risk Factors" elsewhere in this annual report on Form 20-F. Our discussion and analysis for the year ended December 31, 2023 and December 31, 2024 can be found in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, filed with the SEC on February 26, 2025.*

**Overview**

Since our inception in 2008, we have incurred significant operating losses. Our operating loss for the years ended December 31, 2024 and 2025 were $28.0 million and $33.0 million, respectively. As of December 31, 2025, we had an accumulated deficit of $301.5 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and our losses may fluctuate significantly from year to year. We anticipate we will continue to incur expenses in connection with our ongoing activities, as we:

● continue clinical development of D-PLEX<sub>100</sub>;

● file NDAs seeking regulatory approval for D-PLEX<sub>100</sub> pursuant to the FDA's Section 505(b)(2) regulatory pathway in the United States and the hybrid application pathway in the EU;

● continue to invest in the preclinical research and development of OncoPLEX and any other future product candidates;

● continue to invest in our manufacturing facility and complete commercial process validation for the facility;

● establish commercial infrastructure to support the marketing, sale and distribution of D-PLEX<sub>100</sub> if it receives regulatory approval;

● hire additional research and development and general and administrative personnel to support our operations;

● maintain, expand and protect our intellectual property portfolio; and

● incur costs associated with operating as a public company.

We do not have any product candidates approved for sale and have not generated any revenue from product sales.

**Operating Expenses**

Our current operating expenses consist of three components — research and development expenses, marketing and business development expenses and general and administrative expenses.

***Revenue***

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future.

***Research and Development***

Research and development, consists primarily of costs incurred in connection with our research and development activities. This includes conducting clinical trials and preclinical studies, manufacturing development efforts and activities related to regulatory filings for product candidates, as well as overhead costs. Our research and development expenses primarily consist of:

● salaries and personnel-related costs, including benefits and share-based compensation expense, for our scientific personnel for executing clinical trials, preclinical studies, regulatory activities and for performing research and development activities;

● costs related to executing clinical trials and preclinical studies;

● costs related to acquiring, developing and manufacturing materials for such clinical trials and preclinical studies, including costs related to CMC activities;

● costs related to our manufacturing facility, including the production of development batches;

● costs of third-party suppliers;

● fees paid to consultants and other third parties who support the development of our product candidates;

● expenses related to regulatory activities, including consulting fees, filing fees paid to regulatory agencies and other costs incurred in seeking regulatory approval of our product candidates; and

● allocated facility-related costs and other related overhead costs.

Research and development expenses are expensed as incurred. We record accrued expenses for research and development activities conducted, on our behalf, by third-party service providers, which include the performance of clinical trials and the conduct of preclinical studies and contract manufacturing activities. We record these accrued expenses based upon research and development activities performed by such third-party service providers and reported to us, and we include these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations.

We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or preclinical programs.

From inception through December 31, 2025, we incurred $198.2 million in research and development expenses, to advance the development of our clinical-stage product candidates, as well as other preclinical research and development programs. As of December 31, 2025, we received royalty-bearing grants of $4.9 million in the aggregate from the IIA. Pursuant to the terms of the grants, we are required to pay royalties of 3.0% to the IIA on revenues from sales of products for which the research and development was funded, in whole or in part, by the IIA, up to a limit of 100% of the amount of the grant received, linked to the U.S. dollar bearing interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to U.S. Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, as published by the CME Group or any authorized body of the Federal Reserve on the first trading day of each year or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. In addition, we must abide by other restrictions associated with the receipt of such grants under the R&D Law that continues to apply following repayment to IIA. These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our knowledge outside of Israel and may require us to obtain IIA approval for certain actions and transactions and pay additional amounts to the IIA. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israel citizen or resident an "interested party" as defined in the R&D Law requires prior written notice to the IIA. As of December 31, 2025, we also received non-royalty bearing grants of $1.7 million in the aggregate from the IIA and $0.7 million in the aggregate from the FP7.

Substantially all of our research and development expenses for the years ended December 31, 2024 and 2025 were related to the development of D-PLEX<sub>100</sub>.

We expect to continue to incur research and development expenses for the foreseeable future as we seek to advance D-PLEX<sub>100</sub> through clinical trials, including the cost of manufacturing drug supply for these clinical trials, further our preclinical studies and other research and development programs. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

● successful enrolment in and completion of clinical trials;

● establishing an appropriate safety profile;

● receipt of marketing approvals from applicable regulatory authorities;

● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

● commercializing the product candidates, if and when approved, whether alone or in collaboration with others;

● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

● continued acceptable safety profiles of products following approval; and

● retention of key research and development personnel.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

***General and Administrative***

General and administrative expenses consist primarily of salaries and personnel-related expenses, including benefits and share-based compensation expense, for employees performing functions other than research and development. This includes personnel in executive, finance and administrative support functions. Other general and administrative expenses include directors and officer's insurance, professional fees for auditing, tax and legal services and other consulting fees, as well as facility-related costs not otherwise allocated to research and development.

We expect that our general and administrative expenses will increase if any of our product candidates receives regulatory approval and we determine to build a commercial infrastructure to support commercial sales and marketing of our products.

***Marketing and Business Development***

Marketing and business development expenses consist primarily of salaries and personnel-related expenses, including benefits and share-based compensation expense. Other marketing and business development expenses include professional fees and pre-commercialization.

We expect our marketing and business development expenses will increase if any of our product candidates receives regulatory approval and we determine to build a commercial infrastructure to support commercial sales and marketing of our products.

***Financial Expense (Income), Net***

Financial expense (income), net consists of financial expense of the loan provided by Kreos, as well as interest income on our short-term and long-term deposits, remeasurement of warrants and our foreign exchange gains and losses.

**Results of Operations**

***Comparison of the Year Ended December 31, 2024 and 2025***

The following table summarizes our results of operations for the year ended December 31, 2024 and 2025:

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> December 31,** | **Year Ended<br> December 31,** |
|  | **2024** | **2025** |
|  | **(in thousands)** | **(in thousands)** |
| Research and development | $22811 | $23807 |
| Marketing and business development | 945 | 1977 |
| General and administrative | 4273 | 7183 |
| Operating loss | 28029 | 32967 |
| Loss on extinguishment of debt |  | 512 |
| Financial expense, net | 951 | 685 |
| Loss before income tax | $28980 | $34164 |
| Income tax expense | 42 | 5 |
| Net loss | $29022 | $34169 |

---

*Research and Development*

Research and development increased by $1.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily related to an increase of $2.0 million in personnel costs, and an increase of $2.0 million in regulatory and supporting activities towards NDA submission, an increase of $1.1 million in our manufacturing facility expenses, an increase of $0.4 million in non-cash share-based compensation and an increase of $0.2 in research and development costs related to other programs. These increases were offset by a decrease of $4.7 million in costs related to the completed SHIELD II trial.

*Marketing and business development*

Marketing and business development increased by $1.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily related to an increase of $0.4 million in business development and pre-commercialization activities for the product candidate D-PLEX<sub>100</sub>, an increase of $0.3 million in non-cash share-based compensation and an increase of $0.3 million in personal costs.

*General and Administrative*

General and administrative increased by $2.9 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily related to an increase of $1.3 million in non-cash share-based compensation, an increase of $0.8 million in personnel costs, and an increase of $0.8 million in legal, professional and other costs associated with the Company's status as a publicly traded company.

*Loss on extinguishment of debt*

Loss on extinguishment of debt increased by $0.5 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was related to the January 2025 amendment to the Company's loan with Kreos.

*Financial Expense, Net*

Financial expense, net decreased by $0.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

*Income tax expense*

Income taxes generally remained unchanged for the year ended December 31, 2025, compared to the year ended December 31, 2024.

*Net loss*

Net loss increased by $5.1 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily related to the increase in research and development of $1.0 million, an increase in general and administrative of $2.9 million, an increase in marketing and business development costs of $1.0 million and an increase of $0.5 million in loss on extinguishment of debt. These increases were offset by a decrease in Financial expense, net of $0.3 million.

**Qualitative and Quantitative Disclosures about Market Risk**

***Foreign Currency Exchange Risk***

We operate primarily in Israel, and approximately 42% of our expenses are denominated in NIS. We are therefore exposed to market risk, which represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Changes of 5% and 10% in the U.S. dollar/NIS exchange rate would have increased/decreased operating expenses by approximately 1.2% and 2.3%, respectively, during the year ended December 31, 2025.

In particular, a strengthening of the NIS against the U.S. dollar would increase the U.S. dollar value of our NIS-denominated operating expenses, including payroll and other local operating costs, and could adversely affect our gross margin and operating results. During periods in which the NIS appreciates relative to the U.S. dollar, our expenses may increase in U.S. dollar terms even if the underlying NIS-denominated costs remain unchanged. Conversely, a weakening of the NIS relative to the U.S. dollar would reduce the U.S. dollar value of such expenses.

We currently partially hedge our foreign currency exchange rate risk 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.

***Interest Rate Risk***

At present, our investments consist primarily of cash and cash equivalents and short-term deposits. We may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments may be exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any.

***Inflation-Related Risks***

Inflation generally affects us by increasing our NIS-denominated expenses, including salaries and benefits, as well as facility rental costs and payment to local suppliers. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2025, 2024 and 2023.

**B. Liquidity and Capital Resources**

***Sources of Liquidity***

Since our inception, we have not generated any revenue and have incurred operating losses and negative cash flows from our operations.

On April 5, 2022, we entered into the Loan Agreement for up to $15 million with Kreos. The Loan Agreement is comprised of three tranches in the amount of $10.0 million, $2.5 million, and $2.5 million, respectively. Drawdown of the first tranche was available upon the execution of the agreement. The second tranche of $2.5 million was available after we met the second tranche milestone in May 2022. The third and final tranche of $2.5 million will not be drawn since the third tranche milestone has not been met.

The first tranche in the amount of $10 million was drawn on April 26, 2022. The issuance costs due to the Loan Agreement amounted to $0.2 million and the second tranche in the amount of $2.5 million was drawn on July 19, 2022.

The Loan Agreement provides for interest-only repayments of the first tranche until December 31, 2022, followed by 36 equal monthly repayments of principal and interest. For the second tranche, which was drawn in July 2022, the Loan Agreement provides for repayments of interest only until August 31, 2023, followed by 33 equal monthly repayments of principal and interest. The senior secured loan initially had interest at a rate of 9.25%. The loan is prepayable in full, at any time at our option. The loan is secured by our owned equipment, intellectual property and all shares we hold in PolyPid Inc. and PolyPid Pharma SRL, and we paid a customary fee to Kreos for the establishment of the loan. Additionally, PolyPid Inc. entered into a guaranty agreement with Kreos, all as security for monies borrowed by us under the Loan Agreement. On March 29, 2023, we entered into an amendment to the Loan Agreement. Pursuant to this amendment, 70% of the remaining principal and interest repayments will be delayed and repaid on a monthly equal basis from August 2024 to May 2026. The amended secured loan had interest at a rate of 10.00%, and a restructuring fee to Kreos consisting of 1.00% on close of the amendment and an incremental 3.00% at maturity. In return for this additional deferral of repayment, Kreos has the right to receive a potential claw back payment on account of the then outstanding principal amount. This claw back mechanism will be triggered by additional incoming funds from future partnership agreement or additional financing. If triggered, the minimum claw back to be paid is $1.5 million but will not exceed $3 million. Further, the outstanding warrants Kreos received were repriced to have an exercise price of $12.60 per share.

As part of the line of credit, we issued to Kreos a 7-year warrant to purchase 6,491 of our Ordinary Shares with an exercise price of $154.05 per share. Pursuant to the March 2023 amendment, the outstanding warrants Kreos received were repriced to have an exercise price of $12.60 per share. The Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties. The expiration date for each warrant issued will be seven years from the issuance date.

On August 1, 2024, we entered into a second amendment to the Loan Agreement. Pursuant to this second amendment, 60% of the remaining principal and interest repayments under the Loan Agreement will be delayed and repaid on a monthly equal basis from April 1, 2025. The amended secured loan now bears interest at a rate of 12.00%, and we paid a restructuring fee to Kreos of $125,000. The claw back to be paid will not exceed $4.5 million, out of which $4.0 million was already paid as of December 31, 2025. As part of the second amendment, we issued to Kreos a warrant to purchase 40,000 Ordinary Shares of the Company at an exercise price of $3.61 per share. Following the execution of the second amendment, Kreos holds warrants to purchase a total of 46,491 Ordinary Shares of the Company, as follows: (i) 6,491 shares at an exercise price of $12.60 per share; and (ii) 40,000 shares at an exercise price of $3.61 per share. The expiration date for each warrant issued will be seven years from the respective issuance date. On January 6, 2025, we entered into a third amendment to the Loan Agreement. Pursuant to this third amendment, 60% of the principal and interest repayments which were originally scheduled to be paid until the end of June 2025, were delayed and repaid in July 2025. We paid a restructuring fee to Kreos of $160,000 and the end of loan payment was increased from 5% to 7%. As of February 19, 2026, the outstanding principal amount of the loan is $0.7 million.

In July 2021, we entered into a Controlled Equity Offering Sales Agreement, or the Sales Agreement, with Cantor Fitzgerald & Co., or the Agent, pursuant to which we may offer and sell, from time to time, our Ordinary Shares, through the Agent in an at the market offering, or the ATM, as defined in Rule 415(a)(4) under the Securities Act, for an aggregate offering price of up to $45 million. During the year ended December 31, 2024, no Ordinary Shares were sold under the ATM. In July 2024, the Sales Agreement was terminated. In November 2024, we entered into a Sales Agreement, or the New Sales Agreement, with Oppenheimer & Co. Inc., or the Sales Agent, pursuant to which we may offer and sell, from time to time, through the Sales Agent, up to $8,250,000 of our Ordinary Shares. Effective November 26, 2025, we filed a prospectus supplement to increase the maximum aggregate offering price under the New Sales Agreement from $8,250,000 to $15,000,000. During the year ended December 31, 2024, we sold 464 Ordinary Shares under the New Sales Agreement for a total amount of $1,673 and during the year ended December 31, 2025, we sold 1,650,827 Ordinary Shares under the New Sales Agreement for a total amount of $6,136,943.

In January 2024, we entered into a definitive securities purchase agreement for a private placement financing, or the January 2024 Private Placement, pursuant to which we sold 3,143,693 Ordinary Shares at a purchase price of $4.81 per share, 227,619 pre-funded warrants at a purchase price of $4.81 and warrants to purchase up to 3,371,312 Ordinary Shares at an exercise price of $5.50 per share or the January 2024 Warrants. The January 2024 Warrants expire upon the earlier of two years from the date of issuance and 10 trading days following our announcement of the positive recommendation by the DSMB regarding our unblinded interim analysis in our SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> resulting in the stopping of the trial due to positive efficacy. The offering resulted in gross proceeds of $16.2 million. We used the net proceeds from the sale of the securities for our ongoing SHIELD II phase 3 clinical trial, working capital and general corporate purposes. On May 20, 2025, the 227,619 pre-funded warrants were exercised to 227,619 Ordinary Shares. On June 16, 2025, 2,190,121 January 2024 Warrants were exercised as part of the Inducement Letter as defined below and during January 2026 the remaining 1,181,191 January 2024 Warrants expired.

In August 2024, we entered into a definitive securities purchase agreement, pursuant to which we sold 2,006,226 of our Ordinary Shares, at a purchase price of $3.61 per share, 229,231 pre-funded warrants at a purchase price of $3.61 and warrants to purchase up to 1,676,588 Ordinary Shares at an exercise price of $3.61 per share, or the August 2024 Warrants. The August 2024 Warrants expire upon the earlier of two years from the date of issuance and 10 trading days following our announcement of the recommendation by the DSMB regarding our unblinded interim analysis in its SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> resulting in either the stopping of the trial due to positive efficacy, or continuation to planned patient recruitment (up to 630 subjects). The offering resulted in gross proceeds of $8.1 million. Exercise of the August 2024 Warrants in full would result in an additional $6.1 million in gross proceeds to us. We used the net proceeds from the sale of the securities for our working capital and general corporate purposes. In June 2025, the 229,231 pre-funded warrants were exercised to 229,230 ordinary shares. During January and February 2026, 1,007,616 of the August 2024 Warrants were exercised to 716,757 Ordinary Shares and 290,859 pre-funded warrants with an exercise price of $0.0001 for a total amount of $3.2 million.

In December 2024, we entered into a definitive securities purchase agreement, pursuant to which we sold 3,386,962 of our Ordinary Shares, at a purchase price of $3.22 per share, 1,106,868 pre-funded warrants at a purchase price of $3.22 and warrants to purchase up to 6,740,745 Ordinary Shares at an exercise price of $4.00 per share, or the December 2024 Warrants. The December 2024 Warrants expire upon the earlier of nine months from the date of issuance and 10 trading days following our announcement of the top-line results in our SHIELD II Phase 3 trial of D-PLEX<sub>100</sub>. The offering resulted in gross proceeds of $14.5 million. We used the net proceeds from the sale of the securities for our ongoing SHIELD II Phase 3 clinical trial, working capital and general corporate purposes. On June 16, 2025, 5,436,393 December 2024 Warrants were exercised as part of the Inducement Letter as defined below and on June 23, 2025, 10 trading days following the Company's announcement of the top-line results in the Company's SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> the remaining 1,304,352 December 2024 Warrants expired. On June 9, 2025, and September 4, 2025, 513,517 and 593,351, pre-funded warrants were exercised to 513,501 and 593,351 Ordinary Shares, respectively.

In June 16, 2025, we entered into an inducement offer letter agreement, or the Inducement Letter, with certain holders, or each, a Holder, of (i) 2,190,121 warrants to purchase up to 2,190,121 of our Ordinary Shares issued on January 9, 2024 at an original exercise price of $5.50 per Ordinary share, or the January 2024 Warrants, and (ii) 5,436,393 warrants to purchase up to 5,436,393 Ordinary shares issued on December 26, 2024, at an original exercise price of $4.00 per Ordinary share, or the December 2024 Warrants, and together with the January 2024 Warrants, the Existing Warrants. Pursuant to the Inducement Letter, each Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 7,626,514 Ordinary shares, at an exercise price of $3.50 per Ordinary share, in consideration of our agreement to issue new warrants, or the New Warrants, to purchase up to 7,626,514 Ordinary shares, or the New Warrant Shares, at a reduced exercise price of $4.50 per Ordinary share. We received an aggregate net proceeds of approximately $26,690,000 from the exercise of the Existing Warrants by the Holders after deducting offering expenses payable by us. We intend to use the net proceeds from these transactions for an NDA submission with respect to D-PLEX<sub>100</sub>, launch preparations, working capital and general corporate purposes. On December 2025, 725,000 shares held in abeyance were issued to 725,000 Ordinary shares. Of the 7,626,514 Ordinary Shares underlying the Existing Warrants, 2,828,319 shares issuable to certain holders were held in abeyance as of February 19, 2026, due to beneficial ownership restrictions in the Existing Warrants.

During January 2026, 103,950 warrants from the New Warrants were exercised to 103,950 Ordinary Shares for a total amount of $467,775.

As of December 31, 2025, we had $12.9 million in cash and cash equivalents and short-term deposits.

***Cash Flows***

The following table provides information regarding our cash flows for the periods indicated:

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| | | |
|:---|:---|:---|
|  | **Year Ended<br> December 31,** | **Year Ended<br> December 31,** |
|  | **2024** | **2025** |
|  | **(in thousands)** | **(in thousands)** |
| Net cash used in operating activities | $(21963) | $(27879) |
| Net cash used in investing activities | (330) | (6704) |
| Net cash provided by financing activities | 32416 | 25369 |
| Increase (decrease) in cash, cash equivalents and restricted cash | $10123 | $(9214) |

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*Operating Activities*

Net cash used in operating activities related primarily to our net losses adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net loss for non-cash items mainly included depreciation, remeasurement of warrants and share-based compensation.

Net cash used in operating activities was $27.9 million for the year ended December 31, 2025, as compared to $22 million for the year ended December 31, 2024. This increase was primarily related to the completed SHIELD II Phase 3 clinical trial and due to preparation activities for the NDA submission.

*Investing Activities*

Net cash used in investing activities related primarily to the purchase and sale of short-term and long-term deposits and the acquisition of laboratory equipment, office equipment and furniture and leasehold improvements.

Net cash used in investing activities was $6.7 million for the year ended December 31, 2025, as compared to net cash provided by investing activities of $0.3 million for the year ended December 31, 2024. This increase in net cash used for investing activities primarily related to an increase in purchases of short-term deposits, and an increase in purchases of property and equipment.

*Financing Activities*

Net cash provided by financing activities was $25.4 million for the year ended December 31, 2025, as compared to $32.4 million for the year ended December 31, 2024. The decrease in net cash provided by financing activities is primarily related to the net proceeds from the Inducement Letter and use of ATM compared to the private placements that occurred in 2024, as described above.

***Current Outlook***

To date, we have not generated any revenues from the commercial sale of our product candidates, and we do not expect to generate revenue for the foreseeable future. We expect to continue to incur expenses in connection with our ongoing activities, particularly as we continue to conduct clinical trials and seek marketing approval for our product candidates, and as we continue the research and development of our other existing and future product candidates. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

We expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2026. We anticipate that we will need to raise additional capital in order to complete our clinical and regulatory program for D-PLEX<sub>100</sub> towards potential NDA submission, as well as continue to invest in the research and development of OncoPLEX and any other future product candidates. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected, and there is substantial doubt about our ability to continue as a going concern. We have a shareholders' equity of $11.0 million as of December 31, 2025. We expect to continue incurring losses and negative cash flows from operations until our products reach commercial profitability. Our plans to reduce the going concern risk include the continued commercialization of our products, maintaining cost efficiency and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships.

Our future capital requirements will depend on many factors, including:

● the scope, progress, results and costs of our clinical trials;

● the costs, timing and outcome of regulatory review of D-PLEX<sub>100</sub> and any future product candidates;

● the costs and timing of establishing and validating manufacturing processes and facilities for development and commercialization of D-PLEX<sub>100</sub> and any future product candidates, if approved, including our manufacturing facility;

● the number and development requirements of any future product candidates that we may pursue;

● the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

● the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval, which may be affected by market conditions, including obtaining coverage and adequate reimbursement of our product candidates from third-party payors, including government programs and managed care organizations, and competition;

● our ability to establish and maintain collaborations with biopharmaceutical companies on favorable terms, if at all;

● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

● the extent to which we acquire or in-license other product candidates and technologies.

Identifying potential product candidates and conducting clinical trials and preclinical studies is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for the foreseeable future, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, including pursuant to the ATM Offering, debt financings, grants, collaborations, strategic alliances and licensing arrangements. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

**5. C Research and development, patents and licenses, etc.**

During the past three years, we have focused our preclinical and clinical development efforts on our lead product candidate D-PLEX<sub>100 </sub>for the prevention of abdominal (soft tissue) SSIs after abdominal surgery. We also continue to evaluate the development of D-PLEX<sub>100 </sub>for other types of surgeries. Our pipeline also includes an early-stage oncology program focused on the preclinical development of OncoPLEX, an intra-tumoral cancer therapy. We continuously evaluate additional product candidates for our clinical pipeline program that have been developed by us or that may be the subject of in-licenses from third parties or out- licenses to third parties. Our R&D team is comprised of 67 scientists, doctors and clinicians, who are based out of our corporate headquarters in Petach Tikva, Israel. For a description of the amounts that we have incurred over the last two years pursuant to our research and development programs, please see "Item 5. Operating and Financial Review and Prospects— A. Operating Results— Operating Expenses— Research and Development Expenses, net" and "Item 5. Operating and Financial Review and Prospects— A. Results of Operations — Comparison of the year ended December 31, 2024 and 2025 — Research and Development Expenses, net."

Our patent estate includes patents and patent applications with claims directed to our PLEX technology platform, D-PLEX<sub>100</sub> product candidate and claims for potential future product candidates. As of February 25, 2026, our patent estate included 157 issued patents, including utility and composition of matter patents, one allowed patent application and 18 pending patent applications for our product candidates and methods of treatment. For a description of our intellectual property, please see "Item 4. Information on the Company— B. Business Overview."

**5. D Trend Information**

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. From inception through December 31, 2025, we incurred $198.2 million in research and development expenses, net to advance the development of our clinical-stage product candidates, as well as other preclinical research and development programs. We expect to continue to incur expenses in connection with our ongoing activities, particularly as we continue to conduct clinical trials and seek marketing approval for our product candidates, and as we continue the research and development of our other existing and future product candidates. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators. For a description of additional factors that may affect our future performance, please see "Item 5. Operating and Financial Review and Prospects— B. Liquidity and Capital Resources— Current Outlook."

**5. E Critical Accounting Estimates**

Our consolidated financial statements are prepared in accordance with accepted accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. Our most critical accounting policies are summarized below.

***Share-Based Compensation***

We account for share-based compensation in accordance with ASC No. 718, "Compensation—Stock Compensation," which requires companies to estimate the fair value of equity-based payment awards on the date of grant using the option-pricing model.

We recognize compensation expenses only for those shares expected to vest using the straight-line method over the requisite service period of the award, which is generally the option vesting term of three to four years. We recognize forfeitures of awards as they occur.

*Option Valuations*

We selected the Black-Scholes-Merton model as the most appropriate fair value method for our option awards. The Black-Scholes-Merton model requires a number of assumptions, of which the most significant are the share price, volatility and the expected option term.

*Key Assumptions*

The Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying ordinary shares, the expected volatility of the price of our ordinary shares, the expected term of the option, risk-free interest rates and the expected dividend yield of our ordinary shares. These estimates involve inherent uncertainties and the application of the management's judgment. If such inputs change and different assumptions are used, our share-based compensation expenses could be materially different in the future. These assumptions are estimated as follows:

● Fair Value of Ordinary Shares - The fair value of each ordinary share was based on the closing price of the Company's publicly traded ordinary shares as reported on the date of the grant.

● Risk-Free Interest Rate - The risk-free rate for the expected term of the options is based on the Black-Scholes option-pricing model on the yields of U.S. Treasury securities with maturities appropriate for the expected term of employee share option awards.

● Expected Term - The expected term represents the period that options are expected to be outstanding. For option grants that are considered to be "plain vanilla," the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.

● Expected Volatility - As the Company has a short trading history for its ordinary shares, the expected volatility is derived from the average historical share volatilities of several unrelated public companies within the Company's industry that the Company considers to be comparable to its own business over a period equivalent to the option's expected term.

● Expected Dividend Yield - The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. As a result, an expected dividend yield of zero percent was used. If any of the assumptions used in the Black-Scholes-Merton model change significantly, the share-based compensation expenses in future awards may differ materially as compared with the current awards granted.

We incurred non-cash share-based compensation expense of $4.9 million, $2.8 million and $3.4 million during the years ended December 31, 2025, 2024 and 2023, respectively. We expect to continue to grant share option awards in the future, and to the extent that we do, our actual share-based compensation expenses recognized are likely to increase.

***Grants and Participation***

Royalty-bearing grants from the IIA for funding approved research and development projects are recognized at the time we are entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. Since the payment of royalties is not probable when the grants are received, we do not record a liability for amounts received from the IIA until the related revenues are recognized. Non-royalty-bearing grants from the IIA MAGNET program and from FP7 for funding approved research and development projects are recognized at the time we are entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. In the event of failure of a project that was partly financed by the IIA, we would not be obligated to pay any royalties or repay the amounts received.

As of December 31, 2025, we have received royalty-bearing grants totaling $4.9 million. Pursuant to the terms of the grants, we are required to pay royalties to the IIA of 3.0% on revenues from sales of products developed financed in whole or in part by IIA, up to a limit of 100% of the grants received, linked to the U.S. dollar and bearing interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to U.S. Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, as published by the CME Group or any authorized body of the Federal Reserve on the first trading day of each year or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. Through December 31, 2025, no royalties have been paid or accrued.

In addition, we must abide by other restrictions associated with the receipt of such grants under the R&D Law that continue to apply following repayment to the IIA. These restrictions may impair our ability to outsource manufacturing or otherwise transfer our knowledge outside of Israel, or engage in change of control transactions, and may require us to obtain IIA approval for certain actions and transactions and pay additional amounts to the IIA. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israel citizen or resident an "interested party" as defined in the R&D Law requires prior written notice to the IIA.

***Pre-launch Inventory***

 ****

We capitalize pre-launch inventories prior to receiving regulatory approval since regulatory approval and subsequent commercialization of a product are considered probable and because future economic benefits from product sales are expected to be realized. Pre-launch inventories that are capitalized consist exclusively of raw materials intended for use in future commercial manufacturing batches and do not include work-in-process or finished goods. In assessing whether pre-launch inventory should be capitalized, the Company considered a number of specific facts and circumstances, including the product's shelf life, the product's current status in the development and regulatory approval process (NDA to be submitted on a rolling basis beginning by the end of the first quarter of 2026), the viability of commercialization, and relevant market trends. Towards the end of 2025, following the top-line results received in June 2025 and based on our assessment of the regulatory process related to D-PLEX<sub>100</sub>, we concluded that the criteria to capitalize expenditures for pre-launch inventory were met. As a result, we capitalized $1.1 million of pre-launch inventories as of December 31, 2025. If regulatory approval or market acceptance following approval of D-PLEX<sub>100</sub> does not occur, or does not occur on a timely basis prior to the expiration of the related raw material shelf life, we may be required to write off some or all of the capitalized pre-launch inventories, which could adversely affect our financial condition and results of operations.

**ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

**A. Directors and Senior Management.**

The following table sets forth information regarding our executive officers, key employees and directors as of the date of this annual report:

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Dikla Czaczkes Akselbrad | 52 | Chief Executive Officer and Director |
| Dalit Fellous Hazan | 55 | Deputy CEO, Executive Vice President, Research and Development, Clinical and Regulatory Affairs |
| Ori Warshavsky | 48 | Chief Operating Officer - US |
| Jonny Missulawin | 39 | Chief Financial Officer |
| *Non-Employee Directors* |  |  |
| Brooke Story<sup>(1)</sup> | 54 | Director, Chairman of the Board |
| Yechezkel Barenholz, Ph.D. <sup>(1)(3)</sup> | 84 | Director |
| Joseph BenAmram<sup>(1) (2)</sup> | 62 | Director |
| Nir Dror <sup>(1)(3)</sup> | 49 | Director |
| Yitzchak Jacobovitz<sup>(1) (2)</sup> | 50 | Director |
| Itzhak Krinsky, Ph.D. <sup>(1)(2)(3)</sup> | 73 | Director |
| Robert B. Stein, M.D., Ph.D. <sup>(1)</sup> | 75 | Director |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Indicates independent director
 under Nasdaq Stock Market rules.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Member of our Audit Committee.

&nbsp;&nbsp;&nbsp;&nbsp;(3) Member of our Compensation,
 Nominating and Corporate Governance Committee.

**Dikla Czaczkes Akselbrad, Chief Executive Officer, Director**

*Ms. Dikla Czaczkes Akselbrad* has served as our Chief Executive Officer since July 2022 and a director since August 2022. From December 2016 to July 2022, Ms. Czaczkes Akselbrad served as our Executive Vice President and Chief Financial Officer. Prior to that time, Ms. Czaczkes Akselbrad served as our Chief Strategy Officer from July 2014 to December 2016. Ms. Czaczkes Akselbrad has over 20 years of experience in capital markets, finance and business development. Ms. Czaczkes Akselbrad served as a chief financial officer of Compugen Ltd. (Nasdaq: CGEN) from February 2008 to May 2014. She holds a B.A. in accounting and economics and an M.B.A. in finance, both from Tel Aviv University, and is a certified public accountant in Israel.

**Dalit Fellous Hazan, Deputy CEO, Executive Vice President, Research and Development, Clinical and Regulatory Affairs**

*Ms. Dalit Fellous Hazan* has served as our Deputy CEO, Executive Vice President, Research and Development, Clinical and Regulatory Affairs since June 2024, Executive Vice President, Research and Development, Clinical and Regulatory Affairs since March 2022, Senior Vice President, Research and Development and Regulatory Affairs since June 2021, Vice President, Research and Development and Regulatory Affairs since April 2019, Vice President, Regulatory Affairs since March 2018 and Regulatory Affairs Director since April 2016. Prior to that time, Ms. Hazan was the head of Global Regulatory Affairs at Teva Pharmaceuticals Industries Ltd. From 2013 to April 2016 as well as Head of Regulatory Affairs department since 2007. She holds a B.S. in biology and a M.S. in physiology and pharmacology from the Sackler Faculty of Medicine at Tel Aviv University and an Executive M.B.A. from Bar Ilan University.

**Ori Warshavsky, Chief Operating Officer - US**

*Mr. Ori Warshavsky* has served as our Chief Operating Officer - US since January 2022 and as Vice President of Marketing since October 2020. Prior to joining the Company, Mr. Warshavsky spent over 10 years at Teva Pharmaceuticals Industries Ltd. most recently as Senior Director of Oncology Marketing for the U.S. market from December 2017 to September 2020. Prior to that, he served as Head of Market Access for Teva Canada from June 2016 to December 2017 and as Chief of Staff to the Chief Executive Officer of Teva's global generics business from June 2014 to June 2016. He holds a B.Sc. in Biotechnology Engineering from The Ben-Gurion University and an M.B.A. from Duke University.

**Jonny Missulawin, Chief Financial Officer**

*Mr. Jonny Missulawin* has served as our Chief Financial Officer since May 2023. From August 2022 to May 2023, Mr. Missulawin served as our Senior Vice President of Finance. From December 2017 to August 2022, Mr. Missulawin served as our Director of Finance. From May 2014 to December 2017, Mr. Missulawin served as our Financial Controller. Prior to joining the Company, Mr. Missulawin served as a Senior Auditor at Ernst & Young from 2010 to 2013. Mr. Missulawin holds an M.B.A. from Tel Aviv University in Financial Management, a B.A. in Accounting and Economics from Bar-Ilan University, and is a certified public accountant in Israel.

**Brooke Story, Director** 

*Ms. Brooke Story* has served as a director and the chairman of our board of directors since December 2025. Ms. Story has led the separation and integration management office at BD (Becton, Dickinson and Company) (NYSE:BDX), or BD, since June 2024. She was Worldwide President, Surgery, at BD from July 2023 to March 2024, and Worldwide President, Integrated Diagnostic Solutions, at BD from April 2021 to July 2023. From December 2018 to April 2021, Ms. Story worked as President, Pelvic Health and Gastric Therapies, at Medtronic plc (NYSE: MDT) ("Medtronic"). Prior to that, Ms. Story held various positions at Medtronic. Ms. Story has been serving as a director at LivaNova, PLC (Nasdaq: LIVN) since September 2022. She also served as a director at Sigilon Therapeutics, Inc. (Nasdaq: STGX) from June 2021 to September 2022. Ms. Story holds a B.S. degree from the University of Tennessee, Knoxville in Knoxville, Tennessee, United States, and earned an M.B.A. from the University of Michigan in Ann Arbor, Michigan, United States.

**Yechezkel Barenholz, Ph.D., Director**

*Prof. Yechezkel Barenholz, Ph.D.* has served as a director since April 2008. Prof. Barenholz currently serves as head of the Laboratory of Membrane and Liposome Research at the Department of Biochemistry of the Hadassah Medical School at the Hebrew University of Jerusalem, a position he has held since 1971. He has served as Chief Executive Officer and Chief Scientific Officer of Ayana Pharma Ltd. since 2018 and 2014, respectively. He served as a director of Aulos Bioscience from 2019 to 2023. He is the major inventor and co-developer of Doxil<sup>®</sup>, an anti-cancer drug-product which is the first FDA approved nano-drug, approved globally and used to treat more than one million cancer patients. He led the development of generic Doxil at Ayana Pharma Ltd. that was approved by the FDA on October 2021, and which is now sold in the United States and Israel. The MMII liposomal drug-product he invented for the treatment of osteoarthritis is now ready for phase III clinical trials in U.S. and Europe. Prof. Barenholz has been awarded many national and international prizes including the prestigious Israel Prime Minister 2020 EMET prize in Nanotechnology. He is one of the founders of the new field of Nanomedicine. Prof. Barenholz holds a B.S., M.S. and Ph.D. in biochemistry from the Hebrew University of Jerusalem.

**Joseph BenAmram, Director**

*Mr. Joseph BenAmram* has served as a director since May 2023. Mr. Joseph BenAmram held various leadership roles at Merck in sales, marketing and business development for over 22 years. In his last position he was Senior Vice President & President of EURAM Region from October 2017 to February 2019. From June 2016 to September 2017, he served as Senior Vice President & President of MER Region and from October 2013 to May 2016 as Senior Vice President & President, Diversified Brands Division. From August 2010 to October 2013, Mr. BenAmram served as Merck's Vice President & General Manager Emerging Markets. Mr. BenAmram currently serves as the Co- Founder & Chief Strategy Officer of Golden Age Health PTE. LTD. (since March 2023), Senior Advisor to Armira PE (since January 2023) and Senior Advisor to Interna Therapeutics (since May 2021). He holds an M.B.A. from Tel Aviv University, Recanati Graduate School of Business Administration, and a Bachelor's degree in Economics and Management from Tel Aviv University, Recanati Graduate School of Business Administration.

**Nir Dror, Director**

 

*Mr. Nir Dror* has served as a director since May 2020 and the interim chairman of our board of directors from August 2025 to December 2025. Mr. Dror currently serves as the Chief Financial Officer of Aurum Ventures M.K.I. Ltd., a position he has held since 2013. He holds a B.A. and L.L.M. from Tel Aviv University and an M.B.A. from the University of Michigan.

**Yitzchak Jacobovitz, Director**

*Mr. Yitzchak Jacobovitz* has served as a director since February 2025. Mr. Jacobovitz is currently a partner at AIGH Capital Management, a position he has held since 2014. He served as a director at the board of directors of Myomo, Inc. (NYSE American: MYO) from January 2023 until June 2025. Prior to his current positions, Mr. Jacobovitz was a managing director at Capstone, a policy research firm, and an analyst at Leap Tide Capital, a special situations hedge fund. Mr. Jacobovitz earned his Masters in Business Administration from Johns Hopkins University and is a Chartered Financial Analyst.

**Itzhak Krinsky, Ph.D., Director**

*Dr. Itzhak Krinsky, Ph.D.* has served as a director since January 2019. Dr. Krinsky currently serves as a director and member of the audit committee of Noramco Inc., Woodstock Sterile Solutions and Apotex Inc., positions he has held since September 2018, April 2021 and April 2023, respectively. Dr. Krinsky previously worked at Teva Pharmaceuticals Industries Ltd. as the Chairman of Teva Japan, Chairman of Teva South Korea and Head of Business Development, Asia Pacific from October 2012 to April 2016 after serving for more than 7 years on Teva's Executive Committee. Dr. Krinsky served as a director of Kamada Ltd. from November 2017 to November 2019, as a member of the nominating and corporate governance committee of Advanz Pharma Corp. (formerly known as Concordia Healthcare Corp) from May 2017 to September 2018 and a Director and member of the Audit Committee at Globrands Ltd from July 2018 to December 2023. He holds a B.A. and M.A. in economics from Tel Aviv University and a Ph.D. in economics from McMaster University.

**Robert B. Stein, M.D., Ph.D., Director**

*Dr. Robert B. Stein, M.D., Ph.D.*, has served as a director since June 2020. Dr. Stein currently serves as a Venture Partner at Samsara BioCapital, a position he has held since January 2018, and he is the Principal at RBS Biotech Consulting, LLC, which he founded in August 2008. He previously served as the Chief Scientific Officer and Head of Research and Development of Agenus Inc. from January 2014 to January 2016 and as the President of Research and Development from January 2016 to April 2017. He served as President, Regenerative Medicine at Mimedx, from 2019 to 2022 and on the board of directors of Protagenic Therapeutics, Inc. from February 2016 to May 2025. He serves on the boards of directors of ImmunoGenesis Inc. since June 2020, Alpheus Medical Inc. since October 2025 and OncoResponse Inc. since December 2025. He has served as a member of the Washington University St. Louis Biopharmaceutical Advisory Board since October 2020 and a senior advisor to the Needleman Program in Innovation and Commercialization at WUSTL since February 2023. Dr. Stein has been a member of the Scientific Advisory Board of Ohio State University and the James Comprehensive Cancer Center' Drug Development Institute since 2011. He holds a B.S. in biology and chemistry from Indiana University and an M.D. and a Ph.D. in physiology and pharmacology from Duke University. Dr. Stein is board certified in Anatomic and Clinical Pharmacology. He has 46 years of experience in the pharma and biotech industries, including leadership roles at Merck, Ligand, DuPont, Incyte, Roche, and Kinemed in addition to the roles mentioned above. He has played a key role in the discovery and/or development of eight registered medicines, including Sustiva®, Promacta®, and Eliquis®.

***Family Relationships***

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

***Arrangements for Election of Directors and Members of Management***

Our board of directors consists of eight directors, each of whom will continue to serve pursuant to their appointment until the next annual general meeting of shareholders. We are not a party to, and are not aware of, any voting agreements among our shareholders.

**B. Compensation.**

The following table presents in the aggregate all compensation we paid to all of our directors and senior management from January 1, 2025 through December 31, 2025. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.

All amounts reported in the tables below reflect our cost, in thousands of U.S. dollars. Amounts paid in NIS are translated into U.S. dollars at the rate of NIS 3.45 = U.S. $1.00, based on the average representative rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel during such period of time.

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| | | | |
|:---|:---|:---|:---|
|  | **Salary <br> and Related<br> Benefits<sup>(1)</sup>** | **Bonus<br> Payments,<br> Benefits<br> and<br> Perquisites** | **Share-Based<br> Compensation <sup>(2)</sup>** |
| All directors and senior management as a group, consisting of 13**<sup>(3)</sup>** <br> persons as of December 31, 2025 | $1440776 | $333938 | $2472268 |

---

(1) Represents the directors
 and senior management's gross salary plus payment of mandatory social benefits made by the company on behalf of such officer.
 Such benefits may include, to the extent applicable to the executive, payments, contributions and/or allocations for savings funds,
 education funds (referred to in Hebrew as "Keren Hishtalmut"), pension, severance, risk insurances (e.g., life or work
 disability insurance) and payments for social security.

(2) Computed based on Black-Scholes-Merton model.

(3) Includes compensation to Mr. Jacob Harel paid through
 June 2025 and Ms. Nurit Tweezer-Zacks paid through August 2025. Both served as directors on our board.

In accordance with the Israeli Companies Law, we are required to disclose the compensation granted to our most highly compensated officers. The table below reflects the compensation granted during or with respect to the year ended December 31, 2025.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Executive Officer** | **Salary<br> and Related<br> Benefits** | **Bonus<br> Payments,<br> Benefits<br> and<br> Perquisites** | **Share-Based<br> Compensation** | **Total** |
| Dikla Czaczkes Akselbrad | $424892 | $133452 | $1049423 | $1607767 |
| Dalit Fellous Hazan | $305838 | $88968 | $572590 | $967396 |
| Jonny Missulawin | $229040 | $41518 | $387538 | $658096 |
| Ori Warshavsky | $348497 | $70000 | $332914 | $751411 |

---

 ****

***Employment and Services Agreements***

We have entered into written employment or services agreements with each of our executive officers. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information and most of them contain also customary provisions regarding assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors and officers insurance. Members of our senior management may be eligible for bonuses in accordance with our compensation policy and as set forth by our board of directors.

For a description of the terms of our options and option plans, see "Item 6. E. Share Ownership" below.

***Directors' Service Contracts***

Other than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for benefits upon the termination of his or her engagement with our company.

**C. Board Practices.** 

***Board of Directors***

Our amended and restated articles of association, provide that the number of board of directors' members shall be set by the general meeting of the shareholders provided that it will consist of not less than five and not more than eleven directors. Our board of directors presently consists of eight members. We believe that Ms. Story, Prof. Barenholz, Messrs. BenAmram, Dror and Jacobovitz, and Drs. Krinsky and Stein are "independent" for purposes of the Nasdaq Stock Market rules. Under the Israeli Companies Law, the management of our business is vested in our board of directors which is responsible for setting our general policies and supervising the performance of management. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the terms of the employment agreement that we have entered into with her, which was approved by our shareholders.

The Israeli Companies Law and our amended and restated articles of association provide that directors are elected at the annual general meeting of our shareholders by a vote of the majority of the total voting power of our company voting in person, by proxy or by other voting instrument at that meeting. We have only one class of directors.

Under the Israeli Companies Law, our board of directors is required to employ independent judgment and discretion when voting, and is prohibited from entering into any voting arrangements with respect to actions taken at meetings of the board. Further, the Israeli Companies Law provides that in the event a director learns about an alleged breach of law or improper conduct of business relating to a company matter, said director must promptly take action to summon a meeting of the board of directors to address any such breach.

Notwithstanding the exemptions available to foreign private issuers under Nasdaq Rules, we follow the requirements of the Nasdaq Rules with regard to the process of nominating directors by means of our compensation, nominating and corporate governance committee, which is comprised of directors who our board of directors has deemed to be independent under Nasdaq Rules.

In addition, our amended and restated articles of association allows our board of directors to appoint directors to fill vacancies on our board of directors, whether such vacancy is due to a director no longer serving on the board or due to the number of Directors serving on the board being less than the maximum number of directors permitted under our amended and restated articles of association, for a term of office equal to the remaining period of the term of office of each director whose office has been vacated. Vacancies on our board of directors may be filled by a vote of a simple majority of the directors then in office. A director so appointed will hold office until the next annual general meeting of our shareholders in which the other directors then in office are proposed to be replaced or reappointed.

In accordance with the Israeli Companies Law and our amended and restated articles of association, directors may be removed from office by a resolution at a general meeting of shareholders adopted by a majority of 65% of the voting power represented at the general meeting, in person or by proxy or upon the occurrence of certain events.

Under the Israeli Companies Law, and except as described below, we would be required to include on our board of directors at least two members, each of whom qualifies as an external director, and as to whom special qualifications and other provisions would be applicable. We would also be required to include one such external director on each of our board committees.

However, under exemptions applicable for Israeli companies that are listed on stock exchanges outside of Israel, or the Exemptions Regulations, Israeli companies whose shares are traded on stock exchanges, such as The Nasdaq Capital Market and that do not have a controlling shareholder (as defined therein) and which comply with the requirements of the jurisdiction where the company's shares are traded with respect to the appointment of independent directors and the composition of an audit committee and compensation committee, may elect not to follow the Israeli Companies Law requirements with respect to the composition of its audit committee and compensation committee and the appointment of external directors. As we do not have a controlling shareholder, and we comply with the requirements of the Nasdaq Stock Market with respect to the composition of our board and such committees, we therefore choose to follow such exemptions from the Israeli Companies Law requirements with respect thereto, including the appointment of external directors.

Under the Israel Companies law, any shareholder holding at least one percent (1%) of our outstanding voting power may nominate a director at a general meeting of the shareholders. However, any such shareholder may make such a nomination only if a written and timely notice of such shareholder's intent to make such nomination has been given to our board of directors, in accordance with the provisions of our amended and restated articles of association and the Israeli Companies Law. Any such notice must disclose certain information, including the consent of the proposed director nominee to serve as our director if elected; a signed declaration of the nominee declaring that he or she possesses the requisite skills and has the availability to carry out his or her duties; details of such skills; demonstration of absence of any limitation under the Israeli Companies Law that may prevent his or her election; and affirmation that all of the required election-information has been provided to us, pursuant to the Israeli Companies Law.

However, under the Exemptions Regulations, Israeli companies whose shares are listed on foreign stock exchanges may request the company's board of directors to include an appointment of a candidate for a position on the board of directors or the termination of a board member, as an item on the agenda of a future general meeting (if the company sees fit), provided that the shareholder holds at least five percent (5%) of the voting rights of the company, instead of one percent (1%), as required by the Israeli Companies Law.

***Leadership Structure of the Board***

In accordance with the Israeli Companies Law and our amended and restated articles of association, our board of directors is required to elect one of its members to serve as the chairman of the board of directors to preside at the meetings of the board of directors and may also release that member from his or her position as chairman. Our board of directors has appointed Ms. Brooke Story to serve as chairman of the board of directors.

Pursuant to the Israeli Companies Law, neither the chief executive officer nor any of his or her relatives are permitted to serve as the chairman of the board of directors, and a company may not (subject to a certain time-limited exemption, as described below) vest the chairman or any of his or her relatives with the chief executive officer's authorities. In addition, any person who reports, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position in the company or a company under its control, except as a director or chairman of a controlled company. However, and notwithstanding the foregoing, the Israeli Companies Law permits the shareholders of a company to determine, for periods not exceeding three years from each such determination, that the Chairman or his or her relative may serve as chief executive officer or be vested with the chief executive officer's authorities, and that the chief executive officer or his or her relative may serve as Chairman or be vested with the Chairman's authorities. Such determination of a company's shareholders requires either: (1) the approval of at least the majority of the shares of those shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination); or (2) that the total number of shares opposing such determination does not exceed 2% of the total voting power in the company. Currently, the Company maintains separate individuals serving as Chairman and Chief Executive Officer.

**Director Independence**

Under the Israeli Companies Law, an "independent director" is either an external director or a director who meets the same non-affiliation criteria as an external director (except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel) and (ii) the requirement for accounting and financial expertise or professional qualifications), as determined by the audit committee, and who has not served as a director of the company for more than nine consecutive years. For these purposes, ceasing to serve as a director for a period of two years or less would not be deemed to sever the consecutive nature of such director's service.

However, under the Exemptions Regulations, a director who qualifies as an independent director under the relevant non-Israeli rules and who meets certain non-affiliation criteria, which are less stringent than those applicable to independent directors as set forth above, would be deemed an "independent" director pursuant to the Israeli Companies Law provided: (i) he or she has not served as a director for more than nine consecutive years; (ii) he or she has been approved as such by the audit committee; and (iii) his or her remuneration shall be in accordance with the Israeli Companies Law and the regulations promulgated thereunder. For these purposes, ceasing to serve as a director for a period of two years or less would not be deemed to sever the consecutive nature of such director's service.

Although not required of foreign private issuers under Nasdaq Rules, we comply with the requirements thereunder applicable to domestic listed companies that a majority of the board of directors be deemed to be independent under such rules, as well as the independence requirements that are applicable to our audit committee and compensation, nominating and corporate governance committee if we were a domestic listed company, as described below. In light of this obligation, our board of directors has undertaken a review of the independence of our directors under current rules and regulations of the SEC and Nasdaq Rules and considered whether any of our directors has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning such director's background, employment and affiliations, including family relationships, our board of directors determined that Ms. Story, Prof. Barenholz, Messrs. BenAmram, Dror and Jacobovitz, and Drs. Krinsky and Stein, representing seven of our eight directors, are "independent directors" as defined under current rules and regulations of the SEC and Nasdaq Rules. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our share capital by each non-employee director and the transactions involving them described in "Item 7. B. — Related Party Transactions."

***Alternate Directors***

Our amended and restated articles of association provide, consistent with the Israeli Companies Law, that any director may, subject to the conditions set thereto including approval of the nominee by our board of directors, appoint a person as an alternate to act in his place, to remove the alternate and appoint another in his place and to appoint an alternate in place of an alternate whose office is vacated for any reason whatsoever. Under the Israeli Companies Law, 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. Nevertheless, 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. A person who does not have the requisite "financial and accounting experience" or the "professional expertise," depending on the qualifications of the external director he or she is replacing, may not be appointed as an alternate director for an external director. A person who is not qualified to be appointed as an independent director, pursuant to the Israeli Companies Law, may not be appointed as an alternate director of an independent director qualified as such under the Israeli Companies Law. Unless the appointing director limits the time or scope of the appointment, the appointment is effective for all purposes until the appointing director ceases to be a director or terminates the appointment.

**Board Committees**

Under the Israeli Companies Law and our amended and restated articles of association, our board of directors is permitted to form committees, and to delegate to any such committee powers allotted to the board of directors, subject to certain exceptions. In general, the board of directors may overturn a resolution adopted by a committee it has formed; provided, however, that the board's decision shall not affect the ability of third parties, who were not aware of such decision, to rely on the committee's resolution prior to the time it is overturned. Only members of the board of directors can be members of a board committee, unless the committee is solely advisory.

Our board of directors has established two standing committees, which are mandatory under the Israeli Companies Law - the audit committee and the compensation committee.

***Audit Committee***

*Israeli Companies Law Requirements*

Under the Israeli Companies Law, we are required to appoint an audit committee. consisting of at least three directors, including all of the external directors (one of whom must serve as chairman of the committee), if applicable, with a majority of independent members. The audit committee may not include the chairman of the board; a controlling shareholder of the company or a relative of a controlling shareholder; a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or a director who derives most of his or her income from a controlling shareholder. Pursuant to the Israeli Companies Law, the chairman of the audit committee is elected by the members of the audit committee.

However, under the Exemptions Regulations, a company without a controlling shareholder may be exempted from certain obligations stated above.

*Nasdaq Listing Requirements*

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

The members of our audit committee include Mr. BenAmram, Mr. Jacobovitz and Dr. Krinsky. Dr. Krinsky serves as the chairman of our audit committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Capital Market. Our board of directors has also determined that each member of our audit committee is an audit committee financial expert as such term is defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Rules. Each of the members of our audit committee is "independent" as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Rules.

*Audit Committee Role*

Our audit committee charter sets forth the responsibilities of the audit committee consistent with the rules and regulations of the SEC and the Nasdaq Rules, as well as the requirements for such committee under the Israeli Companies Law, including the following:

● oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law;

● recommending the engagement or termination of the person filling the office of our internal auditor, reviewing the services provided by our internal auditor and reviewing effectiveness of our system of internal control over financial reporting;

● recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors; and

● reviewing and monitoring, if applicable, legal matters with significant impact, receiving reports regarding irregularities and legal compliance, acting according to the Company's "whistleblower policy" and recommending actions to our board of directors if so required.

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

Under the Israeli Companies Law, our audit committee is responsible, among other things, for:

● determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;

● determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest), whether such transactions are extraordinary or material transactions, as applicable, under the Israeli Companies Law;

● establishing the approval process for certain related party transactions with a controlling shareholder or in which a controlling shareholder has a personal interest;

● determining the approval process for transactions that are "non-negligible" (i.e., transactions with a controlling shareholder that are classified by the audit committee as non-negligible, even though they are not deemed extraordinary transactions), as well as determining which types of transactions would require the approval of the audit committee;

● where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board of directors and proposing amendments thereto;

● examining our internal audit controls and internal auditor's performance, including whether the internal auditor has sufficient resources and tools to fulfill his responsibilities;

● examining the scope of our auditor's work and compensation and submitting a recommendation with respect thereto to our board of directors, depending on which of them is considering the appointment of our auditor; and

● establishing procedures for the handling of employees' complaints as to the management of our business and the protection to be provided to such employees.

***Compensation, Nominating and Corporate Governance Committee and Compensation Policy***

The composition of our compensation, nominating and corporate governance committee meets the requirements for and guidance under the Nasdaq Rules and current SEC rules and regulations applicable to domestic issuers. The members of this committee are Prof. Barenholz, Mr. Dror, and Dr. Krinsky, each of whom is independent in accordance with the Nasdaq rules. Mr. Dror serves as the chair of the committee.

*Israeli Companies Law Requirements*

Under the Israeli Companies Law, the board of directors of a public company must appoint a compensation committee. The compensation committee must be composed of at least three directors, including all of the external directors, if applicable, who if applicable must constitute a majority of the members of the compensation committee. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director.

However, under the Exemptions Regulations, a company with no controlling shareholder might be exempted from certain obligations mentioned above.

Our compensation committee acts pursuant to a written charter, and complies with the provisions of the Israeli Companies Law, the regulations promulgated thereunder, and our amended and restated articles of association, on all aspects referring to its independence, authorities and practice. Our compensation committee follows home country practice as opposed to complying with the compensation committee membership and charter requirements prescribed under the Nasdaq rules.

Our compensation committee reviews and recommends to our board of directors (and in accordance with the provisions of our amended and restated compensation policy) with respect to our executive officers' and directors': (1) annual base compensation (2) annual incentive bonus, including the specific goals and amounts; (3) equity compensation; (4) employment agreements, severance arrangements, and change in control agreements and provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation, compensation policies or arrangements.

The duties of the compensation committee under the Israeli Companies Law, include the recommendation to the company's board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. That policy must be adopted by the company's board of directors, after considering the recommendations of the compensation, nominating and corporate governance committee, and is subject to the approval of the company's shareholders. The required approval is what we refer to as a special majority approval for compensation. A special majority approval for compensation requires shareholder approval by a majority vote of the shares present and voting at a meeting of shareholders called for such purpose, provided that either: (i) such majority includes at least a majority of the shares held by all non-controlling shareholders and shareholders who do not have a personal interest in such compensation arrangement, excluding abstentions; or (ii) the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company's aggregate voting rights. Under the Israeli Companies Law and under certain conditions, the board of directors may adopt the compensation policy if it is not approved by the shareholder, provided that after the shareholders oppose the approval of such policy, the compensation committee, and the board of directors, revisit the matter and determine whether the adoption of the compensation policy shall be in the best interest of the company.

Our board of directors and our shareholders have approved a compensation policy, which will be in effect until June 25, 2028.

The compensation policy must (subject to certain exemptions) set the framework and limitation for decisions concerning the financial terms of employment or engagement of office holders, including exemption, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company's long-term objectives, business plan and policies, and creation of appropriate incentives for office holders. It must also consider, among other things, the company's risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

● the education, skills, expertise and accomplishments of the relevant office holder;

● the office holder's roles and responsibilities and prior compensation agreements with him or her;

● the relationship between the cost of the terms offered and the cost of the compensation of the company's personnel;

● the possibility of reducing variable compensation at the discretion of the board of directors; and

● the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and

● as to financial payment upon termination of service - the period of service of the office holder, the terms of his or her compensation during such service period, the company's performance during that period of service, the person's contribution towards the company's achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.

The compensation policy must also include the following principles:

● the link between variable compensation and long-term performance and measurable criteria;

● the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation at the time of payment, or, for equity-based variable compensation not settled in cash, the ceiling for the value at the time of grant;

● the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was restated in the company's financial statements;

● the minimum holding or vesting period for variable, equity-based compensation; and

● maximum limits for financial payment upon termination of service.

*Compensation, Nominating and Corporate Governance Committee Roles*

The compensation, nominating and corporate governance committee is responsible for (i) recommending the compensation policy to our board of directors for its approval (and subsequent approval by our shareholders) and (ii) duties related to the compensation policy and to the compensation of our office holders, including:

● recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than five years from a company's initial public offering, or otherwise three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur five years from a company's initial public offering, or otherwise every three years);

● recommending to the board of directors periodic updates to the compensation policy;

● assessing implementation of the compensation policy;

● determining whether to approve the terms of compensation of certain office holders which, according to the Israeli Companies Law, require the committee's approval; and

● determining whether the limited conditions exist which would allow for the compensation terms of a candidate for the position of the chief executive officer not to be brought for approval by the shareholders.

Our compensation, nominating and corporate governance charter sets forth the responsibilities of the compensation, nominating and corporate committee, which include:

● the responsibilities set forth in the compensation policy;

● reviewing and, subject to applicable law, approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors; and

● the administration of our clawback policy; and

● reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.

● overseeing our corporate governance functions on behalf of the board of directors;

● making recommendations to our board of directors and management regarding corporate governance issues;

● identifying and evaluating candidates to serve as our directors consistent with the criteria approved by our board of directors;

● reviewing and evaluating the performance of our board of directors, including our board of directors committees and management;

● serving as a focal point for communication between director candidates, non-committee directors and our management;

● selecting or recommending to the board of directors for selection candidates to the board;

● making other recommendations to the board of directors regarding affairs relating to our directors; and

● to retain, oversee the work of, and subsequently terminate, outside legal counsel, compensation consultants and other experts and consultants that assist with its responsibility.

***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. Nevertheless, under regulations promulgated under the Israeli Companies Law, we are required to disclose the annual compensation of our five most highly compensated office holders (as defined under the Israeli Companies Law) on an individual basis. This disclosure is not as extensive as that required of a U.S. domestic issuer.

***Internal Auditor***

Under the Israeli Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not, among other things, be:

● a person (or a relative of a person) who holds 5% or more of the company's outstanding shares or voting rights;

● a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;

● an office holder (including a director) of the company (or a relative thereof); or

● a member of the company's independent accounting firm, or anyone on its behalf.

The role of the internal auditor is to examine in accordance with the accepted professional standards, among other things, our compliance with applicable law and orderly business procedures, and to report to the chief executive officer, the chairman of the board and the chairman of the audit committee. The internal auditor is entitled to receive notice of audit committee meetings and to participate in them. In addition, the internal auditor may request that the chairman of the audit committee convene a meeting within a reasonable time to discuss an issue raised by the internal auditor. The internal auditor is responsible for preparing a proposal for an annual or periodical audit plan and submit such plan to the board of directors or the audit committee for their approval.

Our internal auditor is not an interested party in the Company and not one of our office holders.

Our internal auditor is Mrs. Shmuely Rose, of Brightman Almagor Zohar & Co. (Deloitte).

**Exemption, Insurance and Indemnification of Directors and Officers**

Under the Israeli Companies Law, a company may not exempt an office holder from liability for a breach of the duty of loyalty. An Israeli company may exempt 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 exemption is included in its articles of association. Our amended and restated articles of association provide that subject to the provisions of the Israeli Companies Law, and the Israeli Securities Law, 5728-1968, we exempt and release, in advance, any office holder from any liability to the Company for damages arising out of a breach of the office holder's duty of care towards the Company to the fullest extent permitted by law. Subject to the aforesaid limitations, under the indemnity and exculpation agreements, we exempt and release our office holders to the fullest extent permitted by law, from any liability for damages caused as a result of the Indemnitee's breach of the duty of care to the Company while acting in good faith and having reasonable cause to assume that such act or omission would not prejudice the interests of the Company.

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

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

● reasonable litigation expenses, including attorneys' fees, incurred by the office holder (1) 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; and (2) in connection with a monetary sanction;

● 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; and

● expenses incurred by an office holder in connection with an administrative procedure instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to the Securities Law.

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

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

● a breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and

● a financial liability imposed on the office holder in favor of a third party.

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

● a breach of a duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the best interest company;

● a breach of the 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, civil fine, monetary sanction or forfeit levied against the office holder.

Under the Israeli Companies Law, exemption, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. However, under regulations promulgated under the Israeli Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined in accordance with the company's compensation policy that was approved by the shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company's profitability, assets or obligations. In addition, under regulations promulgated under the Israeli Companies Law, the insurance of office holders of a company in which there is a controlling shareholder who is also an office holder, a board approval is also required, subject to meeting the aforesaid conditions

Our amended and restated articles of association permit us to exempt, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Israeli Companies Law.

We obtained directors and officers liability insurance for the benefit of our office holders in an amount standard for a company of our size. We intend to maintain such increased coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law. We entered into agreements with each of our directors and executive officers exempting them from liability to us for damages caused to us as a result of a breach of duty of care and undertaking to indemnify them, in each case, to the fullest extent permitted by our amended and restated articles of association and Israeli law. In the opinion of the SEC, however, indemnification of directors and office holders for liabilities arising under the Securities Act is against public policy and therefore unenforceable.

***Duties of Shareholders***

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

● amendment of the articles of association;

● increase in the company's authorized share capital;

● merger; and

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

**D. Employees.**

On December 31, 2023, we had 59 full-time employees and 3 part-time employees. On December 31, 2024, we had 57 full-time employees and 4 part-time employees. On December 31, 2025, we had 69 full-time employees and 6 part-time employees.

As of February 25, 2026, we had four full-time senior management employees, including our Chief Executive Officer, Chief Financial Officer, Deputy CEO, Executive Vice President, Research and Development, Clinical and Regulatory Affairs and Chief Operating Officer – US. In addition, we currently have 72 full-time employees and 6 part-time employees. 77 of our employees are located in Israel and one employee located in New Jersey, the United States. None of our employees are represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance with relevant labor laws by the Israeli Ministry of Economy and which apply such agreement provisions to our employees even though they are not part of a union that has signed a collective bargaining agreement.

All of our employment and consulting agreements include employees' and consultants' undertakings with respect to non-competition, assignment to us of intellectual property rights developed in the course of employment, and confidentiality. The enforceability of such provisions is limited by Israeli law.

**E. Share Ownership.**

See "Item 7.A. Major Shareholders" below.

**F. Action to Recover Erroneously Awarded Compensation**

Not applicable.

**Amended and Restated 2012 Share Option Plan** 

Our Amended and Restated 2012 Share Option Plan, or the 2012 Plan, was adopted by our board of directors on August 29, 2012, amended on January 30, 2018, and extended on August 8, 2022. The 2012 Plan provides for the grant of options to our directors, employees, office holders, service providers and consultants. A total of 537,336 shares are reserved but unissued under our 2012 Plan as of February 19, 2026. As of February 19, 2026, options to purchase 2,969,118 Ordinary Shares were issued and outstanding with an average exercise price of $4.78 per share, out of which options to purchase 1,257,379 Ordinary Shares were vested as of that date, with an average exercise price of $6.01 per share.

The 2012 Plan is administered by our board of directors, which, on its own or upon the recommendation of a remuneration committee or any other similar committee of the board of directors, shall determine, subject to applicable law, the identity of grantees of awards and various terms of the grant. With respect to those grantees subject to Israeli taxation, the 2012 Plan provides for granting options in compliance with Section 102 of the Israeli Income Tax Ordinance, 1961, or the Ordinance, under the capital gains track, and for grants to non-employee Israeli service providers, consultants and shareholders who hold 10% or more of our total share capital or are otherwise controlling shareholders pursuant to section 3(i) of the Ordinance, as further detailed below.

Section 102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102 includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance, the most favorable tax treatment for the grantee, permits the issuance to a trustee under the "capital gain track." However, under this track we are not allowed to deduct an expense with respect to the issuance of the options or shares.

Generally, options granted to our employees will vest over three or four years, as may be determined by the board of directors at the time of the grant, and not be exercisable before the first anniversary of the date of grant of options. With respect to the remainder of the options, they will become exercisable in equal amounts of options at the end of each three-month period till the end of the third or fourth year from the date of grant, as the case may be. Generally, options that are not exercised within ten years from the grant date shall expire.

Other than by will or laws of descent, neither the options nor any right in connection with such options are assignable or transferable. If we terminate a grantee's employment or service for any reason whatsoever, other than for cause, any options granted to such grantee that are not vested shall immediately expire. All of the grantee's vested options shall be deemed expired on the earlier of: (a) the expiration date of such vested options as was in effect immediately prior to such termination; or (b) three months following the date of such termination, or if such termination is the result of death or disability of the grantee, 12 months from the date of such termination. However, for certain executives and other senior management, our board of directors (and shareholders where applicable) has resolved that the expiration date of their vested options shall be between one to four years following the date of such termination. If we terminate a grantee's employment or service for cause, all of the grantee's vested and unvested options will expire on the date of termination. Also, and subject to applicable law, if the grantee's employment or services is terminated for cause, then we will have a right of repurchase against any shares issued pursuant to the exercise of options. In the event that we exercise such right of repurchase, we will pay such grantee for each such share being repurchased an amount equal to the price originally paid by the grantee for such share. Alternatively, we may assign such rights of repurchase to our shareholders pro rata to their respective holdings of our issued and outstanding shares.

If we are party to a merger or consolidation, outstanding options and shares acquired under the 2012 Plan will be subject to the agreement of merger or consolidation, which will provide for one or more of the following: (i) the assumption of such options by the surviving corporation or its parent, (ii) the substitution by the surviving corporation or its parent of new options, or (iii) in the event that the successor entity neither assumes nor substitutes all outstanding options, then each respective grantee shall have a period of 15 days to exercise his or her vested options, after which all remaining options, whether vested or not shall expire. For certain individuals, if their position is terminated within a certain period after the transaction, their options shall accelerate.

In the event of any variation in our share capital, including a share dividend, share split, combination or exchange of shares, recapitalization, or any other like event, the number, class and kind of shares subject to the 2012 Plan and outstanding options, and the exercise prices of the options, will be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate exercise price of the options.

On January 30, 2018, our board of directors adopted an appendix to the 2012 Plan for U.S. residents, which was approved by our shareholders on February 8, 2018. Under this appendix, the 2012 Plan provides for the granting of options to U.S. residents in compliance with the U.S. Internal Revenue Code of 1986, as amended. The total number of Ordinary Shares reserved for grant as incentive stock options under this appendix is 300,000.

**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

**A. Major Shareholders.**

The following table sets forth information regarding beneficial ownership of our Ordinary Shares as of February 19, 2026 by:

● each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our voting securities.

● each of our directors and executive officers; and

● all of our directors and executive officers as a group.

Except as indicated in footnotes to this table, we believe that the shareholder named in this table has sole voting and investment power with respect to all shares shown to be beneficially owned by it, based on information provided to us by such shareholder. The shareholders listed below do not have any different voting rights from any of our other shareholders.

---

| | | |
|:---|:---|:---|
|  | **No. of Shares<br> Beneficially<br> Owned <sup>(1)</sup>** | **Percentage<br> Owned <sup>(2)</sup>** |
| **Holders of more than 5% of our voting securities:** | | |
| Aurum Ventures M.K.I. Ltd. <sup>(3)</sup> | 5001561 | 23.81% |
| AIGH Investment Partners <sup>(4)</sup> | 4737526 | 9.99% |
| Rodney Hodges <sup>(5)</sup> | 3179747 | 15.73% |
| Investor Company ITF Rosalind Master Fund L.P. <sup>(6)</sup> | 5483443 | 9.99% |
| **Directors and executive officers:** |  |  |
| Dikla Czaczkes Akselbrad <sup>(7)</sup> | 305053 | 1.6 |
| Dalit Fellous Hazan <sup>(8)</sup> | 144689 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Jonny Missulawin <sup>(9)</sup> | 99260 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Ori Warshavsky <sup>(10)</sup> | 82486 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Yechezkel Barenholz <sup>(11)</sup> | 12890 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Nir Dror <sup>(12)</sup> | 10727 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Brooke Story <sup>(13)</sup> | 1091 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Yitzhak Jacobovitz |  |  |
| Itzhak Krinsky <sup>(14)</sup> | 11560 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Joseph BenAmram <sup>(15)</sup> | 9780 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| Robert B. Stein <sup>(16)</sup> | 10927 | &nbsp;&nbsp;&nbsp;&nbsp;\* |
| All directors and executive officers as a group (11 persons) | 688463 | 3.6% |

---

\* Under 1%

(1) Beneficial ownership 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, even if not the record owner, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities. A person also is considered to be the "beneficial owner" of securities that the person has the right to acquire within 60 days by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through companies in which they have a "controlling interest," which means the direct or indirect power to direct the management and policies of the entity.

(2) The percentages shown are based on 19,083,236 Ordinary Shares issued and outstanding as of February 19, 2026.

&nbsp;&nbsp;&nbsp;&nbsp;(3) The beneficial ownership is based on the information provided in a Schedule 13G/A, filed on September 8, 2025, and on information subsequently provided to the Company, and consists of (i) 3,082,682 Ordinary Shares issued and outstanding; and (ii) 1,918,879 Ordinary Shares issuable upon the exercise of warrants. First Trust Management, AG, as trustee of the MK Trust, or the Trust, is the ultimate controlling party in Aurum Ventures M.K.I. Ltd., as the outstanding shares of Aurum Ventures M.K.I. Ltd. are held indirectly by the Trust for which Mr. Morris Kahn was the settlor. Consequently, the Trust may be deemed to share beneficial ownership of the Ordinary Shares held by Aurum Ventures M.K.I. Ltd. The Trust or any of the Trust's beneficiaries, do not make day-to-day voting or investment decisions with respect to the Ordinary Shares held by Aurum Ventures M.K.I. Ltd. and therefore disclaim beneficial ownership of them except to the extent of his pecuniary interest therein. Aurum Ventures M.K.I Ltd.'s address is 16 Aba Hillel St, Ramat Gan, Israel, 5250608.

&nbsp;&nbsp;&nbsp;&nbsp;(4) The beneficial ownership is based on the information provided in a Schedule 13G/A, filed on January 30, 2026 of AIGH Investment Partners LP and WVP Emerging Manager Onshore Fund, LLC - AIGH Series (together referred to as AIGH Investment Partners), and includes (i) 1,793,117 Ordinary Shares issued and outstanding; (ii) 549,141 shares held in abeyance; and (iii) 2,395,268 Ordinary Shares issuable upon the exercise of warrants. The percentage in the table above gives effect to the 9.99% beneficial ownership limitation set forth under the terms of the warrants. Orin Hirschman has the voting and dispositive power over the shares held by AIGH Investment Partners. AIGH Investment Partners' address is 6006 Berkeley Ave., Baltimore, MD, 21209. Based on information provided to us by AIGH Investment Partners on January 7, 2025.

(5) Includes (i) 1,587,138
 Ordinary Shares issued and outstanding, (ii) 736,110 Ordinary Shares issuable upon the exercise of Warrants, exercisable at a price
 of $4.50 per share, and (iii) 124,654 Ordinary Shares issuable upon the exercise of warrants exercisable at a price of $3.61 per
 share held by Xenia Venture Capital Limited, or Xenia, is an investment holding company and (i) 457,374 Ordinary Shares issued and
 outstanding, (ii) 232,920 Ordinary Shares issuable upon the exercise of Warrants, exercisable at a price of $4.50 per share, and
 (iii) 41,551 Ordinary Shares issuable upon the exercise of warrants, exercisable at $3.61 per share, issued in the August 2024 Private
 Placement held by Oriella Limited, or Oriella, is an investment holding company. The entire share capital of Centaurus Investments
 Limited, the parent holding company of Xenia and Oriella, is held by Geneva Trust Company (GTC) SA (as trustee of the VT Two Trust).
 Geneva Trust Company (GTC) SA (a subsidiary of Geneva Holding Company (GHC) SA), as trustee of VT Two Trust, has the authority to
 dispose of and exercise control over the disposal of the assets of the VT Two Trust. POD Sàrl, of which Mr. Rodney Hodges
 holds 100% of the share capital, wholly owns Geneva Holding Company (GHC) SA. Mr. Hodges does not make day-to-day voting or investment
 decisions with respect to the Ordinary Shares held by Xenia and Oriella and therefore disclaims beneficial ownership of them except
 to the extent of his pecuniary interest therein. Xenia's address is Yigal Alon 76, Tel Aviv, Israel, 6706701. Oriella Limited's
 address is 34 Rue de l'Athénée, 1206, Geneva, Switzerland. Centaurus Investments Limited's address is Rue
 de l'Athenee 34, 1206 Geneve, Switzerland. Geneva Trust Company (GTC) SA's address is Rue de l'Athenee 34, 1206 Geneve, Switzerland.
 Geneva Holding Company (GHC) SA's address is Rue de l'Athenee 34, 1206 Geneve, Switzerland. POD Sàrl's address
 is Rue de l'Athenee 34, 1206 Geneve, Switzerland. Rodney Hodges' address is Rue de l'Athenee 34, 1206 Geneve, Switzerland.
 Based on information provided to us by Xenia and Oriella on June 23, 2025 and July 1, 2025, respectively.

(6) The beneficial ownership
 is based on the information provided in a Schedule 13G/A, filed on February 11, 2026, and includes (i) 696,556 Ordinary Shares issued
 and outstanding and (iii) 4,786,887 Ordinary Shares issuable upon the exercise of warrants. The percentage in the table above gives
 effect to the 9.99% beneficial ownership limitation set forth under the terms of the warrants. Steven Salamon has the voting and
 dispositive power over the shares held by Investor Company ITF Rosalind Master Fund L.P. Investor Company ITF Rosalind Master Fund
 L.P.'s address is TD Waterhouse, 77 Bloor St. W, Toronto, ON, Canada, M5S 1M2.

(7) Consists of (i) 934
 Ordinary Shares and (ii) 304,119 Ordinary Shares issuable upon exercise of outstanding options that are exercisable within 60
 days. In addition, Ms. Czaczkes Akselbrad holds options to purchase 271,267 Ordinary Shares that are not exercisable within 60 days.
 Ms. Czaczkes Akselbrad's options have expiration dates ranging from April 5, 2026 to June 25, 2035, and a weighted average
 exercise price of $5.07.

(8) Consists of 144,689 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Ms. Hazan holds options to
 purchase 135,374 Ordinary Shares that are not exercisable within 60 days. Ms. Hazan's options have expiration dates ranging
 from April 5, 2026 to May 12, 2035, and a weighted average exercise price of $4.58.

(9) Consists of 99,260 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Mr. Missulawin holds options
 to purchase 91,253 Ordinary Shares that are not exercisable within 60 days. Mr. Missulawin's options have expiration dates
 ranging from March 8, 2027 to May 12, 2035, and a weighted average exercise price of $4.55.

(10) Consists of (i) 267
 Ordinary Shares and (ii) 82,219 Ordinary Shares issuable upon exercise of outstanding options that are exercisable within 60
 days. In addition, Mr. Warshavsky holds options to purchase 76,908 Ordinary Shares that are not exercisable within 60 days. Mr. Warshavsky's
 options have expiration dates ranging from November 9, 2030 to May 12, 2035, and a weighted average exercise price of $4.57.

(11) Consists of (i) 2,760
 Ordinary Shares and (ii) 10,130 Ordinary Shares issuable upon exercise of outstanding options that are exercisable within 60
 days. In addition, Prof. Barenholz holds options to purchase 11,733 Ordinary Shares that are not exercisable within 60 days. Prof.
 Barenholz's options have an expiration date of April 13, 2031 to June 25, 2035, and a weighted average exercise price of $3.83.

(12) Consists of 10,727 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Mr. Dror holds options to
 purchase 11,733 Ordinary Shares that are not exercisable within 60 days. Mr. Dror's options have an expiration date of June
 18, 2030 to June 25, 2035, and a weighted average exercise price of $4.34.

(13) Consists of 1,091 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Ms. Story holds options to
 purchase 16,365 Ordinary Shares that are not exercisable within 60 days. Ms. Story's options have an expiration date of February
 4, 2036, and a weighted average exercise price of $4.01.

(14) Consists of (i) 833
 Ordinary Shares and (ii) 10,727 Ordinary Shares issuable upon exercise of outstanding options that are exercisable within 60
 days. In addition, Mr. Krinsky holds options to purchase 11,733 Ordinary Shares that are not exercisable within 60 days. Mr. Krinsky's
 options have an expiration date of August 7, 2029 to June 25, 2035, and a weighted average exercise price of $4.34.

(15) Consists of 9,780 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Mr. BenAmram holds options
 to purchase 11,785 Ordinary Shares that are not exercisable within 60 days. Mr. BenAmram's options have expiration date
 of May 8, 2033 to June 25, 2035, and a weighted average exercise price of $3.40.

(16) Consists of 10,927 Ordinary
 Shares issuable upon exercise of outstanding options that are exercisable within 60 days. In addition, Mr. Stein holds options to
 purchase 11,733 Ordinary Shares that are not exercisable within 60 days. Mr. Stein's options have an expiration date
 of June 18, 2030 to June 25, 2035, and a weighted average exercise price of $4.51.

***Changes in Ownership of Major Shareholders***

Over the course of 2025, there were decreases in the percentage ownership of Triple Gate Partners, LP (from 9.99 to 3.07%), Yehuda Nir (from 9.47% to 4.99%), Aharon Lukach (from 7.7% to 2.99%) and The Hewlett Fund LP (from 9.99% to 2.89%).

Over the course of 2024, there were increases in the percentage ownership of Xenia, Centaurus Investments Limited, Geneva Holding Company (GHC) SA, Geneva Trust Company (GTC) SA, POD Sarl and Rodney Hodges (from 9.99% to 19.99%) and Triple Gate Partners, LP (from 0 to 9.99%). On the other hand, there were decreases in the percentage of ownership of Yehuda Nir (from 17.55% to 9.47%) and Aharon Lukach (from 9.42% to 7.7%).

Over the course of 2023, there were no material increases in the percentage ownership of our major shareholders; however, all of the holders above 5% increased their holdings due to the January 2024 Private Placement.

***Record Holders***

As of February 20, 2026, there were a total of 55 holders of record of our shares, of which 21 record holders had registered addresses in the United States. This number is not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees.

We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to us which would result in a change in control of us at a subsequent date.

**B. Related Party Transactions.**

See "Item 6.B. Compensation" for compensation to our directors and officers.

**Agreements and Arrangements With, and Compensation of, Directors and Executive Officers**

Certain of our executive officers have employment agreements with us, which contain customary provisions and representations, including confidentiality, non-competition, non-solicitation and inventions assignment undertakings by the executive officers. Under current applicable Israeli employment laws, we may not be able to enforce (either in whole or in part) covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

**Indemnification Agreements**

Our amended and restated articles of association permit us to exculpate, indemnify and insure each of our directors and office holders to the fullest extent permitted by the Israeli Companies Law. We entered into indemnity and exemption agreements with each of our directors and executive officers, undertaking to indemnify them to the fullest extent permitted by Israeli law, including with respect to liabilities resulting from a public offering of our shares, to the extent that these liabilities are not covered by insurance. We have also obtained directors and officers insurance for each of our executive officers and directors.

**C. Interests of Experts and Counsel.**

None.

**ITEM 8. FINANCIAL INFORMATION.**

**A. Consolidated Statements and Other Financial Information.**

See "Item 18. Financial Statements."

**Legal Proceedings**

We are not currently subject to any material legal proceedings.

**Dividends**

We have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

The Israeli Companies Law imposes further restrictions on our ability to declare and pay dividends.

Payment of dividends may be subject to Israeli withholding taxes. See "Item 10. E. Taxation" for additional information.

**B. Significant Changes.**

No significant change, other than as otherwise described in this annual report on Form 20-F, has occurred in our operations since the date of our consolidated financial statements included in this annual report on Form 20-F.

**ITEM 9. THE OFFER AND LISTING**

**A. Offer and Listing Details.**

Our Ordinary Shares were traded under the symbol "PYPD" on the Nasdaq Global Market from June 2020 until June 2023 and have been trading under the symbol "PYPD" on the Nasdaq Capital Market since June 2023.

**B. Plan of Distribution.**

Not applicable.

**C. Markets.**

Our Ordinary Shares were listed for trading on the Nasdaq Global Market from June 2020 until June 2023 and have been listed for trading on the Nasdaq Capital Market since June 2023.

**D. Selling Shareholders.**

Not applicable.

**E. Dilution.**

Not applicable.

**F. Expenses of the Issue.**

Not applicable.

**ITEM 10. ADDITIONAL INFORMATION**

**A. Share Capital.**

Not applicable.

**B. Memorandum and Articles of Association.**

A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this Item is set forth in Exhibit 2.3 to this annual report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.

**C. Material Contracts.**

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this annual report on Form 20-F:

● Form of Officer Indemnity and Exculpation Agreement, filed as [Exhibit 10.1](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003758/a2241928zex-10_1.htm) to Form F-1 (File No. 333-238978) filed on June 22, 2020. See Item 6. C. "Board Practices — Exculpation, Insurance and Indemnification of Directors and Officers" for more information about this document.

● Compensation Policy, filed as [Exhibit 99.1](https://www.sec.gov/Archives/edgar/data/1611842/000121390025057785/ea024690001ex99-1_polypid.htm) to Form 6-K (File No. 001-38428) filed on June 25, 2025, and incorporated herein by reference. See Item 6. C. "Board Practices — Compensation, Nominating and Corporate Governance Committee and Compensation Policy" for more information about this document.

● Agreement for the Provision of a Loan Facility of up to $15 million dated April 5, 2022, by and between Kreos Capital VI (Expert Fund) LP and PolyPid Ltd., filed as [Exhibit 10.1](http://www.sec.gov/Archives/edgar/data/1611842/000121390022018318/ea158121ex10-1_polypidltd.htm) to Form 6-K (File No. 001-38428), filed on April 6, 2022. See Item "Item 5.B- Liquidity and Capital Resources" for more information about this document, as well as the amendments thereto filed as [Exhibit 10.2](http://www.sec.gov/Archives/edgar/data/1611842/000121390023025588/ea176210ex10-2_polypidltd.htm) to Form 6-K (File No. 001-38428), filed on March 31, 2023, as [Exhibit 99.6](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-6_polypid.htm) to Form 6-K (File No. 001-38428), filed on August 2, 2024 and as [Exhibit 4.20](https://www.sec.gov/Archives/edgar/data/1611842/000121390025017412/ea023153301ex4-20_polypid.htm) to Form 20-F (File No. 001-38428), filed on February 26, 2025. See Item "Item 5.B- Liquidity and Capital Resources" for more information about this agreement.

● License, Distribution and Supply Agreement, dated August 2, 2022, by and between PolyPid Ltd. and Mercury Pharma Group Limited, under the trade name Advanz Pharma Holdings, filed as [Exhibit 10.1](http://www.sec.gov/Archives/edgar/data/1611842/000121390022045399/ea163911ex10-1_polypidltd.htm) to Form 6-K (File No. 001-38428), filed on August 8, 2022. See Item "Item 4.B – Business Overview" for more information about this document.

● Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated January 4, 2024, filed as [Exhibit 99.2](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-2_polypid.htm) to Form 6-K (File Number 001-38428), filed on January 5, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated January 4, 2024, filed as [Exhibit 99.3](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-3_polypid.htm) to Form 6-K (File Number 001-38428), filed on January 5, 2024.

● Form of Ordinary Share Purchase Warrant, filed as [Exhibit 99.4](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-4_polypid.htm) to Form 6-K (File Number 001-38428), filed on January 5, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Pre-Funded Ordinary Share Purchase Warrant. filed as [Exhibit 99.5](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-5_polypid.htm) to Form 6-K (File Number 001-38428), filed on January 5, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated August 1, 2024, filed as [Exhibit 99.2](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-2_polypid.htm) to Form 6-K (File Number 001-38428), filed on August 2, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated August 1, 2024, filed as [Exhibit 99.3](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-3_polypid.htm) to Form 6-K (File Number 001-38428), filed on August 2, 2024.

● Form of Ordinary Share Purchase Warrant, filed as [Exhibit 99.4](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-4_polypid.htm) to Form 6-K (File Number 001-38428), filed on August 2, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Pre-Funded Ordinary Share Purchase Warrant. filed as [Exhibit 99.5](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-5_polypid.htm) to Form 6-K (File Number 001-38428), filed on August 2, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated December 23, 2024, filed as [Exhibit 99.2](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-2_polypid.htm) to Form 6-K (File Number 001-38428), filed on December 26, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated December 23, 2024, filed as [Exhibit 99.3](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-3_polypid.htm) to Form 6-K (File Number 001-38428), filed on December 26, 2024.

● Form of Ordinary Share Purchase Warrant, filed as [Exhibit 99.4](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-4_polypid.htm) to Form 6-K (File Number 001-38428), filed on December 26, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Pre-Funded Ordinary Share Purchase Warrant, filed as [Exhibit 99.5](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-5_polypid.htm) to Form 6-K (File Number 001-38428), filed on December 26, 2024. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of New Warrant, filed as [Exhibit 4.1](https://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex4-1_polypid.htm) to Form 6-K (File Number 001-38428), filed on June 17, 2025. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of New Pre-Funded Warrant, filed as [Exhibit 4.2](https://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex4-2_polypid.htm) to Form 6-K (File Number 001-38428), filed on June 17, 2025. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

● Form of Inducement Letter, filed as <u>[Exhibit 10.1](http://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex10-1_polypid.htm)</u> to Form 6-K (File Number 001-38428), filed on June 17, 2025. See Item 5.B "Liquidity and Capital Resources —Cash Flows — Financing Activities."

**D. Exchange Controls**.

There are currently no Israeli currency control restrictions on remittances of dividends on our Ordinary Shares, proceeds from the sale of the shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.

**E. Taxation.** 

**Israeli Tax Considerations and Government Programs**

The following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income tax considerations concerning the ownership and disposition of our Ordinary Shares by holders that purchase Ordinary Shares pursuant to the offering and hold such Ordinary Shares as capital assets. This summary does not discuss all the aspects of Israeli income tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this annual report on Form 20-F and does not take into account possible future amendments which may be under consideration.

***General Corporate Tax Structure in Israel***

In 2026, Israeli resident companies like us are generally subject to corporate tax at the rate of 23.0%.

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

***Taxation of our Israeli Individual Shareholders on Receipt of Dividends***

Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our Ordinary Shares (other than bonus shares or share dividends) at a rate of 25.0%, or 30.0% if the recipient of such dividend is a "substantial shareholder" (as defined below) at the time of distribution or at any time during the preceding 12-month period.

As of January 1, 2017, an additional income tax at a rate of 3.0% has been imposed on high earners whose annual taxable income or gains exceed certain thresholds (NIS 721,560 as of January 1, 2026). Starting from the 2025 tax year, a two-tier additional tax will be implemented: a first tier of 3% on total taxable income exceeding the threshold mentioned above, and a second tier of 2% on capital income exceeding the same threshold (including dividend income). This means that capital income may be subject to a cumulative surtax of up to 5%.

A "substantial Shareholder" is generally a person who alone, or together with his or her relative, as defined under section 88 of the Israeli Income Tax Ordinance [New Version], 1961, or the Israeli Tax Ordinance, or another person who collaborates with him based on an agreement on substantive matters of the company on a regular basis, holds, directly or indirectly, at least 10.0% of any of the "means of control" of the corporation. "Means of control" generally include the right to vote in a general meeting of shareholders or receive profits, nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), and whether by virtue of shares, rights to shares or other rights, or in any other manner, including by means of voting or trusteeship agreements.

The term "Israeli resident" for individuals is generally defined under the Israeli Tax Ordinance, as an individual whose center of life is in Israel. According to the Israeli Tax Ordinance, in order to determine the center of life of an individual, account will be taken of the individual's family, economic and social connections, including, but not limited to: (a) the place of the individual's permanent home; (b) the place of residence of the individual and the individual's family; (c) the place of the individual's regular or permanent place of business or the place of the individual's permanent employment; (d) place of the individual's active and substantial economic interests; (e) place of the individual's activities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present in Israel for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual's presence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual or by the assessing officer.

It should be noted that in 2025 a legislative memorandum was published proposing a reform to the rules for determining Israeli tax residency of individuals. The proposed framework is intended to increase certainty in the application of the residency tests, primarily by assigning significantly greater weight to the number of days of physical presence in Israel, and correspondingly less weight to the qualitative "center of life" factors, as compared to the current law. In addition, the presumptions set forth in the proposed legislation are intended to be less readily rebuttable than those applicable under the existing regime.

***Taxation of Israeli Resident Corporations on Receipt of Dividends***

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

***Capital Gains Taxes Applicable to Israeli Resident Shareholders***

The income tax rate applicable to Real Capital Gain, which is the excess of the total capital gain over inflationary surplus computed generally on the basis of the increase in the Israeli consumer price index between the date of purchase and the date of disposal, derived by an Israeli individual from the sale of shares which had been purchased after January 1, 2012, whether listed on a stock exchange or not, is 25.0%. However, if such shareholder is considered a "Substantial Shareholder" (as defined above) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30.0%. As of January 1, 2017, an additional income tax at a rate of 3.0% has been imposed on high earners whose annual taxable income or gains exceed certain thresholds (NIS 721,560 as of January 1, 2026). Starting from the 2025 tax year, a two-tier additional tax will be implemented: a first tier of 3% on total taxable income exceeding the threshold mentioned above, and a second tier of 2% on capital income exceeding the same threshold (including capital gains income). This means that capital income may be subject to a cumulative surtax of up to 5%.

Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at ordinary income rates (currently, up to 47.0% +3% for individuals and as of January 1, 2022, the corporate tax rate is 23.0%).

***Taxation of Non-Israeli Shareholders on Receipt of Dividends***

Non-Israeli residents (individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at the rate of 25.0% (or 30.0% if such person or entity is a "substantial shareholder" at the time receiving the dividend or on any date in the 12 months preceding such date), which tax will be withheld at source, unless a tax certificate is obtained from the Israeli Tax Authority, or ITA, authorizing withholding-exempt remittances or a reduced rate of tax pursuant to an applicable tax treaty.

Notwithstanding the foregoing, a dividend paid by the Company arising from the profits of a preferred enterprise and / or a preferred technological enterprise entitled to tax benefits under the Capital Investment Encouragement Law shall generally be taxable at 20% for individuals, unless subject to a lower rate under the relevant double taxation treaties. Corporations will generally be subject to a withholding tax rate of either 20% (Preferred Enterprise) or a reduced rate of 4% (Preferred Technological Enterprise), subject to fulfillment of certain conditions.

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

For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25.0%, or 15.0% in the case of dividends paid out of the profits of an Approved Enterprise, subject to certain conditions. Where the recipient is a U.S. corporation owning 10.0% or more of the issued and outstanding voting shares of the paying corporation during the part of the paying corporation's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any) and not more than 25.0% of the gross income of the paying corporation for such prior taxable year (if any) consists of certain interest or dividends and the dividend is not paid from the profits of an Approved Enterprise, the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.

***Capital Gains Income Taxes Applicable to Non-Israeli Shareholders***

Provided certain conditions are met, non-Israeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our Ordinary Shares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel.

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

***Law for the Encouragement of Capital Investments***

The Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible intangible assets) by "Industrial Enterprises" (as defined under the Investment Law). Generally, an investment program that is implemented in accordance with the provisions of the Investment Law, referred to as an Approved Enterprise, a Beneficiary Enterprise, a Preferred Enterprise, a Preferred Technological Enterprise, or a Special Preferred Technological Enterprise, is entitled to benefits as discussed below. These benefits may include cash grants from the Israeli government and tax benefits based upon, among other things, the geographic location in Israel of the facility in which the investment is made.

On January 1, 2011, new legislation amending the Investment Law came into effect, or the 2011 Amendment. The 2011 Amendment introduced a new status of Preferred Enterprise. Subject to certain conditions, a Preferred Enterprise entitles the company to reduced corporate tax rates, without limitations on dividends and other distributions, instead of full exemption from corporate tax. These preferred corporate tax rates vary from 7.5% for Preferred Enterprises residing in a "development zone," or 16.0% for Preferred Enterprises residing in other zones in Israel. Dividend distributions are subject to 20% tax rate, subject to the provision of the relevant tax treaty.

In order to gain the status of Preferred Enterprise, a company must meet the conditions of competitive industrial company that contributes to the GDP or comparative industrial company in the field of renewable energy.

The Investment Law was significantly amended effective as of January 1, 2017, or the 2017 Amendment. The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016 and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two types of "Technological Enterprises," as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.

The 2017 Amendment provides that a preferred company, which is defined as either (i) a company incorporated in Israel which is not wholly owned by a governmental entity, or (ii) a limited partnership that: (a) was registered under the Israeli Partnerships Ordinance; and (b) all of its limited partners are companies incorporated in Israel, but not all of them are governmental entities; which has, among other things, Preferred Enterprise status and is controlled and managed from Israel, or a Preferred Company, satisfying certain conditions will qualify as having a "Preferred Technological Enterprise" and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as "Preferred Technological Income," as defined in the Investment Law. The corporate tax rate may be further reduced to 7.5% with respect to a Preferred Technological Enterprise located in development zone "A," as defined under the Investment Law. In addition, a Preferred Technological Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain "Benefitted Intangible Assets" (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israel Innovation Authority.

Dividends distributed by a Preferred Technological Enterprise, paid out of Preferred Technological Income, are generally subject to tax at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate).

The withholding tax rate applicable to distribution of dividend from such income to non-Israeli residents is 25% (or 30% if distributed to a "substantial shareholder" at the time of the distribution or at any time during the preceding twelve months period), which may be reduced by applying in advance for a withholding certificate from the ITA. A "substantial shareholder" is generally a person who, alone or together with such person's relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the "Means of Control" of the corporation. "Means of control" generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right.

In addition, if such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met (including that less than 25% of the shareholder of the foreign company are Israeli residents), the withholding tax rate will be 4% (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company, no tax is required to be withheld.

**Material U.S. Federal Income Tax Considerations to U.S. Holders**

The following discussion describes the material U.S. federal income tax considerations relating to the ownership and disposition of our Ordinary Shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that hold such Ordinary Shares as capital assets within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold Ordinary Shares as part of a "straddle", "hedge", "conversion transaction", "synthetic security" or integrated investment, persons who received their Ordinary Shares as compensatory payments, persons that have a "functional currency" other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of our shares by vote or value, persons subject to special tax accounting rules as a result of any item of gross income with respect to the shares being taken into account in an applicable financial statement, corporations that accumulate earnings to avoid U.S. federal income tax, partnerships and other pass-through entities, and investors in such pass-through entities). This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax or Medicare tax consequences.

As used in this discussion, the term "U.S. Holder" means a beneficial owner of Ordinary Shares that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) 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, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) 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 United States persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Ordinary Shares, the U.S. federal income tax consequences relating to an investment in the ordinary shares will depend in part upon the status and activities of such entity or arrangement and the particular partner. Any such entity or arrangement should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the ownership and disposition of Ordinary Shares.

THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.

***Passive Foreign Investment Company Consequences***

In general, a corporation organized outside the United States will be treated as PFIC for any taxable year in which either (1) at least 75% of its gross income is "passive income", or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which, generally may be determined based on the fair market value of each asset, with the value of goodwill and going concern value being determined in large part by reference to the market value of our Ordinary Shares, which may be volatile). Based upon the estimated value of our assets, including any goodwill, and the nature and estimated composition of our income and assets, we may be classified as a PFIC for the taxable year ended December 31, 2025 and in future taxable years In particular, so long as we do not generate revenue from operations for any taxable year and do not receive any research and development grants, or even if we receive a research and development grant, if such grant does not constitute gross income for U.S. federal income tax purposes, we likely will be classified as a PFIC for such taxable year. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual basis after the end of each taxable year. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status for our taxable year ended December 31, 2025 and also expresses no opinion with regard to our expectations regarding our PFIC status in the future.

If we are a PFIC in any taxable year during which a U.S. Holder owns Ordinary Shares, the U.S. Holder could be liable for additional taxes and interest charges under the "PFIC excess distribution regime" upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder's holding period for the Ordinary Shares, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of the Ordinary Shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder's holding period for Ordinary Shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.

If we are a PFIC for any year during which a U.S. Holder holds Ordinary Shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds the Ordinary Shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a "deemed sale" election with respect to the Ordinary Shares. If the election is made, the U.S. Holder will be deemed to sell the Ordinary Shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder's Ordinary Shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.

If we are a PFIC for any taxable year during which a U.S. Holder holds Ordinary Shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.

If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on Ordinary Shares if such U.S. Holder makes a valid "mark-to-market" election for our Ordinary Shares. A mark-to-market election is available to a U.S. Holder only for "marketable stock." Our Ordinary Shares will be marketable stock as long as they remain listed on the Nasdaq Capital Market and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income for each taxable year of the U.S. holder, the excess of the fair market value of Ordinary Shares held at the end of such taxable year over the adjusted tax basis of such Ordinary Shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such Ordinary Shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder's tax basis in Ordinary Shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of Ordinary Shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.

A mark-to-market election will not apply to Ordinary Shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder's mark-to-market election for the Ordinary Shares.

The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid QEF election. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Prospective investors should assume that a QEF election will not be available.

Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.

**The U.S. federal income tax rules relating to PFICs are very complex. U.S. Holders are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the ownership and disposition of Ordinary Shares, the consequences to them of an investment in a PFIC, any elections available with respect to the Ordinary Shares and the IRS information reporting obligations with respect to the ownership and disposition of Ordinary Shares of a PFIC.**

***Distributions***

We do not anticipate declaring or paying dividends to holders of our ordinary stock in the foreseeable future. However, if we make a distribution contrary to the expectation, subject to the discussion above under "—*Passive Foreign Investment Company Consequences*," a U.S. Holder that receives a distribution with respect to Ordinary Shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder's pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder's pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder's Ordinary Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder's Ordinary Shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends.

Distributions on Ordinary Shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Subject to certain complex conditions and limitations, Israeli taxes withheld on any distributions on Ordinary Shares may be eligible for credit against a U.S. Holder's federal income tax liability. The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming an itemized deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.

Dividends paid by a "qualified foreign corporation" are eligible for taxation to non-corporate U.S. holders at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances. Distributions on Ordinary Shares that are treated as dividends generally will not be eligible for the "dividends received" deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.

A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on Ordinary Shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Israel for purposes of, and are eligible for the benefits of, the U.S.-Israel Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Israel Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Our Ordinary Shares will also generally be considered to be readily tradable on an established securities market in the United States if they are listed on The Nasdaq Capital Market. Therefore, subject to the discussion above under "—Passive Foreign Investment Company Consequences," if the U.S.-Israel Treaty is applicable, or if our Ordinary Shares are readily tradable on an established securities market in the United States, such dividends will generally be "qualified dividend income" in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transaction requirements. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.

***Sale, Exchange or Other Disposition of Ordinary Shares***

Subject to the discussion above under "—*Passive Foreign Investment Company Consequences*," a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of Ordinary Shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder's adjusted tax basis in the Ordinary Shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, the Ordinary Shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of Ordinary Shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.

***Information Reporting and Backup Withholding***

U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in Ordinary Shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under "*Passive Foreign Investment Company Consequences*", each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for Ordinary Shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.

Dividends on and proceeds from the sale or other disposition of Ordinary Shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate United States taxpayer identification number or otherwise establish a basis for exemption (usually on IRS Form W-9), or (2) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder's U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.

U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules.

**F. Dividends and Paying Agents.**

Not applicable.

**G. Statement by Experts.**

Not applicable.

**H. Documents on Display.**

We are subject to the information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. The SEC maintains an Internet website 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 the SEC's website at www.sec.gov.

As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting (until March 18, 2026 for our officers and directors) and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.

We maintain a corporate website www.polypid.com. Information contained on, or that can be accessed through, our website and the other websites referenced above do not constitute a part of this annual report on Form 20-F. We have included these website addresses in this annual report on Form 20-F solely as inactive textual references.

**I. Subsidiary Information.**

Not applicable.

**J. Annual Report to Security Holders.**

Not applicable.

**ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

In the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.

**Quantitative and Qualitative Disclosure About Market Risk** 

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, a substantial majority of our cash and cash equivalents is held in deposits that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following paragraph.

**Foreign Currency Exchange Risk** 

We operate primarily in Israel, and approximately 42% of our expenses are denominated in NIS. We are therefore exposed to market risk, which represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Changes of 5% and 10% in the U.S. dollar/NIS exchange rate would have increased/decreased operating expenses by approximately 1.2% and 2.3%, respectively, in 2025.

We currently partially hedge our foreign currency exchange rate risk 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.

**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.

**D. American Depositary Shares.**

Not applicable.

**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**

Not applicable.

**ITEM 15. CONTROLS AND PROCEDURES** 

**(a) Disclosure Controls and Procedures**

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Our management, including our Chief Executive Officer and Chief Financial Officer, recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

**(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) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based principally on the framework and criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end of the period covered by this report. Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025 at providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

**(c) Attestation Report of the Registered Public Accounting Firm**

We are exempt from the requirement to provide an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to our status under the Exchange Act as a non-accelerated filer at the current time.

**(d) Changes in Internal Control over Financial Reporting**

During the year ended December 31, 2025, there were no changes in our internal control over financial reporting 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 each of Dr. Krinsky, Mr. BenAmram and Mr. Jacobovitz is an audit committee financial expert as such term is defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Rules. Each of the members of our audit committee is "independent" as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Rules.

**ITEM 16B. CODE OF ETHICS**

We have adopted a Corporate Code of Ethics and Conduct applicable to all of our directors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a "code of ethics" as defined in Item 16B of Form 20-F promulgated by the SEC. The full text of the Corporate Code of Ethics and Conduct is posted on our website at www.polypid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report and is not incorporated by reference herein. If we make any amendment to the Corporate Code of Ethics and Conduct or grant any waivers, including any implicit waiver, from a provision of such code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC.

**ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

Kost, Forer, Gabbay & Kasierer, Certified Public Accountants (Israel), an independent registered public accounting firm and a member firm of EY Global, has served as our principal independent registered public accounting firm for each of the two years ended December 31, 2024 and 2025.

The following table provides information regarding fees paid by us to Kost, Forer, Gabbay & Kasierer and/or other member firms of EY Global for all services, including audit services, for the years ended December 31, 2024 and 2025:

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> December 31,** | **Year Ended<br> December 31,** |
|  | **2024** | **2025** |
| Audit fees <sup>(1)</sup> | $237000 | $252000 |
| Audit-related fees <sup>(2)</sup> | 60000 | 54000 |
| Tax fees <sup>(3)</sup> |  | 943 |
| All other fees | - | - |
| Total | $297000 | $306943 |

---

(1) Includes professional services
 rendered in connection with the audit of our annual financial statements, review of our interim financial statements and tax returns.

(2) Includes professional services
 rendered, such as comfort letters for the Sales Agreement and audit of the IIA programs, in connection with the preparation the Company's
 registration statement on Form F-3.

(3) Include fees for professional
 services rendered by our independent registered public accounting firm for tax compliance and tax advice on actual transactions.

***Pre-Approval of Auditors' Compensation***

Pursuant to the regulations promulgated under the Israeli Companies Law, pre-approval of audit fees is only mandatory for a public company. In addition, under our audit committee charter our audit committee is responsible for, among other things, pre-approving audit and non-audit services provided to us by the independent registered public accounting firm. Subject to the board of directors' and shareholders' approval, if and to the extent required by applicable law, the audit committee shall have the authority to approve all audit engagement fees and terms and all non-audit engagements, as may be permissible, with the independent registered public accounting firm. All the fees set forth above were pre-approved by the audit committee.

**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**

The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with various corporate governance practices. In addition, we are required to comply with the Nasdaq Stock Market rules. Under those rules, we may elect to follow certain corporate governance practices permitted under the Israeli Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market rules for U.S. domestic issuers.

In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market rules, we have elected to follow the provisions of the Israeli Companies Law, rather than the Nasdaq Stock Market rules, with respect to the following requirements:

● *Proxy Statements.* We will not be required to and, in reliance on home country practice, we do not intend to comply with certain Nasdaq Rules regarding the provision of proxy statements for general meetings of shareholders. Israeli corporate law does not have a regulatory regime for the solicitation of proxies. We intend to provide notice convening an annual general meeting, including an agenda and other relevant documents.

● *Quorum*. Nasdaq rules require that the quorum for purposes of any meeting of the holders of a listed company's common voting stock, as specified in the company's bylaws, be no less than 33 1/3% of the company's outstanding common voting stock. However, as permitted under the Israeli Companies Law and pursuant to our amended and restated articles of association, the quorum required for an ordinary meeting of shareholders will consist of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Israeli Companies Law, who hold at least 25% of the voting power of our shares. A meeting adjourned for lack of a quorum is generally adjourned to the same day in the following week at the same time and place or to a later time or date if so specified in the summons or notice of the meeting. At the adjourned meeting, in general any shareholder present in person or by proxy shall constitute a lawful quorum

● *Nomination of our directors*. The nominations for directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with the provisions of our amended and restated articles of association and the Israeli Companies Law. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent directors or by a vote consisting solely of our independent directors in order to determine which persons shall be nominated for election by our shareholders, as required under the Nasdaq Stock Market rules.

● *Independent Directors*. Under the Israeli Companies Law, we would be required to include on our board of directors at least two members, each of whom qualifies as an external director, and as to whom special qualifications and other provisions would be applicable. We would also be required to include one such external director on each of our board committees. However, as we do not have a controlling shareholder, and we comply with the requirements of the Nasdaq Stock Market with respect to the composition of our board and such committees, we therefore are exempt from the Israeli Companies Law requirements with respect thereto, including the appointment of external directors. We are required, however, to ensure that all members of our audit committee are "independent" under the Nasdaq Rules. Furthermore, Israeli law does not require, and our independent directors do not conduct regularly scheduled meetings at which only they are present, as otherwise required by the Nasdaq Stock Market rules.

● *Shareholder Approval.* We will not be required to and, in reliance on home country practice, we do not intend to comply with certain Nasdaq Rules regarding shareholder approval for certain issuances of securities under Nasdaq Rule 5635. In particular, under the Nasdaq Rules, shareholder approval is generally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer's shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest (or such persons collectively have a 10% or greater interest) in the target company or the assets to be acquired or the consideration to be received and the present or potential issuance of Ordinary Shares, or securities convertible into or exercisable for Ordinary Shares, could result in an increase in outstanding Ordinary Shares or voting power of 5% or more; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of a stock option or purchase plan or other equity compensation arrangements, pursuant to which stock may be acquired by officers, directors, employees or consultants (with certain limited exception); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (and/or via sales by directors or officers or 5% shareholders) if such equity is issued (or sold) at below a specified minimum price. By contrast, under the under the Israeli Companies Law, shareholder approval is required for, among other things: (i) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (ii) extraordinary transactions with controlling shareholders of publicly held companies, which require special approval, and (iii) terms of employment or other engagement of the controlling shareholder of us or such controlling shareholder's relative, which require special approval. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies

● *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 as set forth in the Israeli Companies Law, which requires the approval of the audit committee, or the compensation committee, as the case may be, 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 Stock Market rules.

● *Annual Shareholders Meeting.* We will not be required to and, in reliance on home country practice, we do not intend to comply with Nasdaq Stock Market Rule 5620(a), which requires a listed company to hold its annual shareholders meeting within one year of the company's fiscal year-end. Under the Israeli Companies Law, we are required to hold an annual shareholders meeting each calendar year and within 15 months of the last annual shareholders meeting.

We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act of 2002, the rules adopted by the SEC and the Nasdaq Stock Market corporate governance rules and listing standards. Because we are a foreign private issuer, our directors and senior management are not subject to short-swing profit and insider trading reporting obligations under Section 16 of the Exchange Act. They are, however, subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related SEC rules.

**ITEM 16H. MINE SAFETY DISCLOSURE**

Not applicable.

**ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**

Not applicable.

**ITEM 16J. INSIDER TRADING POLICIES**

We have adopted an insider trading policy, or the Policy, governing the purchase, sale and other transactions in our securities that applies to our directors, officers, employees, consultants and other covered persons, including immediate family members and entities controlled by any of the foregoing persons.

The Policy prohibits, among other things, insider trading and certain speculative transactions in our securities (including short sales, buying put and selling call options and other hedging or derivative transactions in our securities) and establishes a regular blackout period schedule during which directors, officers, employees, consultants and other covered persons may not trade in the Company's securities, as well as certain pre-clearance procedures that directors and officers must observe prior to effecting any transaction in our securities.

The Company believes that the Policy is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and listing standards applicable to the Company. A copy of the Policy is filed as Exhibit 11.1 to this Form 20-F.

**ITEM 16K. CYBERSECURITY.**

Our Board recognizes the critical importance of maintaining the trust and confidence of our business partners and employees. The Board is actively involved in oversight of our risk management program, and cybersecurity represents an important component of our overall approach to risk management. Our cybersecurity policies, standards, processes and practices are fully integrated into our risk management program and are based on recognized frameworks established by HIPAA, GDPR and GMP industry standards. In general, we seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.

**Risk Management and Strategy**

As part of the critical elements of our overall risk management approach, our cybersecurity program is focused on the following key areas:

● Governance: As discussed in more detail under the heading "Governance," the Board oversees our risk management process, including the management of risks arising from cybersecurity threats.

● Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.

● Technical Safeguards: The Company deploys technical safeguards that are designed to protect the Company's information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence.

● Incident Response and Recovery Planning: The Company has established and maintains comprehensive incident response and recovery plans that fully address the Company's response to a cybersecurity incident, and such plans are tested and evaluated on a regular basis.

● Education and Awareness: The Company provides regular, mandatory training for personnel regarding cybersecurity threats as a means to equip the Company's personnel with effective tools to address cybersecurity threats, and to communicate the Company's evolving information security policies, standards, processes and practices.

We engage in the periodic assessment and testing of our policies, standards, processes and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments, threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning. We periodically engage third parties to perform assessments on our cybersecurity measures, including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness. The results of such assessments, audits and reviews are reported to the Audit Committee and the Board, and we adjust our cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, audits and reviews.

**Governance**

The Board oversees our risk management process, including the management of risks arising from cybersecurity threats. The Board receives periodic presentations and reports on cybersecurity risks, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to our third parties. The Board also receives prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed.

The Company's IT Manager works collaboratively across the Company to implement a program designed to protect the Company's information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with the Company's incident response and recovery plans. To facilitate the success of the Company's cybersecurity risk management program, external third party vendors are retained to address cybersecurity threats and to respond to cybersecurity incidents. The IT Manager monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and will report such threats to Company's management and Board.

We are utilizing the services of an external IT firm, YouCC Technologies Ltd., as our IT Manager

Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to affect the Company, including its business strategy, results of operations or financial condition.

**PART III**

**ITEM 17. FINANCIAL STATEMENTS**

We have elected to provide financial statements and related information pursuant to Item 18.

**ITEM 18. FINANCIAL STATEMENTS**

The consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1.

**ITEM 19. EXHIBITS.** 

---

| | |
|:---|:---|
| **Exhibit** | **Description** |
| 1.1 | [Amended and Restated Articles of Association of PolyPid Ltd., filed as Exhibit 99.1 to Form 6-K (File No. 001-38428) filed on May 8, 2023, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390023037069/ea178129ex99-1_polypid.htm) |
| 2.1 | [Form of Ordinary Share Purchase Warrant, filed as Exhibit 99.4 to Form 6-K (File Number 001-38428), filed on January 5, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-4_polypid.htm) |
| 2.2 | [Form of Pre-Funded Ordinary Share Purchase Warrant, filed as Exhibit 99.5 to Form 6-K (File Number 001-38428), filed on January 5, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-5_polypid.htm) |
| 2.3 | [Description of Securities (filed herewith).](ea027672701ex2-3_polypid.htm) |
| 2.4 | [Form of Pre-Funded Warrant, filed as Exhibit 99.5 to Form 6-K (File No. 001-38428), filed on August 2, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-5_polypid.htm) |
| 2.5 | [Form of Ordinary Share Purchase Warrant, filed as Exhibit 99.4 to Form 6-K (File Number 001-38428), filed on August 2, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-4_polypid.htm) |
| 2.6 | [Form of Pre-Funded Warrant, filed as Exhibit 99.5 to Form 6-K (File No. 001-38428), filed on December 26, 2024, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-5_polypid.htm) |
| 2.7 | [Form of Ordinary Share Purchase Warrant, filed as Exhibit 99.4 to Form 6-K (File Number 001-38428), filed on December 26, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-4_polypid.htm) |
| 2.8 | [Form of New Warrant, filed as Exhibit 4.1 to Form 6-K (File Number 001-38428), filed on June 17, 2025, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex4-1_polypid.htm) |
| 2.9 | [Form of New Pre-Funded Warrant, filed as Exhibit 4.2 to Form 6-K (File Number 001-38428), filed on June 17, 2025, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex4-2_polypid.htm) |
| 4.1 | [Form of Officer Indemnity and Exculpation Agreement, filed as Exhibit 10.1 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003758/a2241928zex-10_1.htm) |
| 4.2 | [Compensation Policy, filed as Exhibit 99.1 to Form 6-K (File No. 001-38428) filed on June 25, 2025, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390025057785/ea024690001ex99-1_polypid.htm) |
| 4.3 | [Amended and Restated PolyPid Ltd. 2012 Share Option Plan, filed as Exhibit 99.1 to Form 6-K (File No. 001-38428) filed on May 30, 2025, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390025049464/ea024381201ex99-1_polypid.htm) |
| 4.4 | [Lease Agreement, dated March 27, 2014, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4 as Exhibit 10.4 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_4.htm) |
| 4.5 | [Addendum to Lease Agreement, dated July 1, 2014, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.1 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_41.htm) |
| 4.6 | [Second Addendum to Lease Agreement, dated July 23, 2017, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.2 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_42.htm) |
| 4.7 | [Third Addendum to Lease Agreement, dated November 28, 2017, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.3 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_43.htm) |

---

---

| | |
|:---|:---|
| 4.8 | [Fourth Addendum to Lease Agreement, dated January 22, 2018, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.4 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_44.htm) |
| 4.9 | [Fifth Addendum to Lease Agreement, dated November 4, 2018, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.5 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_45.htm) |
| 4.10 | [Sixth Addendum to Lease Agreement, dated December 15, 2019, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 10.4.6 to Form F-1 (File No. 333-238978) filed on June 22, 2020, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000104746920003386/a2241750zex-10_46.htm) |
| 4.11 | [Seventh Addendum to Lease Agreement, dated April 11, 2021 by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 4.11 to Form 20-F (File No. 001-38428) filed on February 28, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022009722/f20f2021ex4-11_polypidltd.htm) |
| 4.12 | [Eighth Addendum to Lease Agreement, dated August 9, 2021, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 4.12 to Form 20-F (File No. 001-38428) filed on February 28, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022009722/f20f2021ex4-12_polypidltd.htm) |
| 4.13 | [Ninth Addendum to Lease Agreement, dated October 26, 2021, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 4.13 to Form 20-F (File No. 001-38428) filed on February 28, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022009722/f20f2021ex4-13_polypidltd.htm) |
| 4.14 | [Tenth Addendum to Lease Agreement, dated January 25, 2022, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 4.14 to Form 20-F (File No. 001-38428) filed on February 28, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022009722/f20f2021ex4-14_polypidltd.htm) |
| 4.15 | [Eleventh Addendum to Lease Agreement, dated January 14, 2024, by and between PolyPid Ltd. and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original), filed as Exhibit 4.15 to Form 20-F (File No. 001-38428) filed on March 6, 2024, and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1611842/000121390024020424/ea0200588ex4-15_polypid.htm). |
| 4.16 | [Sales Agreement, dated November 8, 2024, by and between PolyPid Ltd. and Oppenheimer & Co. Inc., filed as Exhibit 10.1 to form 6-K (File No. 001-38428) filed on November 8, 2024, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024095892/ea022035801ex10-1_polypid.htm) |
| 4.17+ | [Agreement for the Provision of a Loan Facility of up to US$15,000,000 dated April 5, 2022, by and between Kreos Capital VI (Expert Fund) LP and PolyPid Ltd., filed as Exhibit 10.1 to Form 6-K (File No. 001-38428), filed on April 6, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022018318/ea158121ex10-1_polypidltd.htm) |
| 4.18+ | [First Amendment to the Agreement for the Provision of a Loan Facility of up to US$15,000,000 dated March 29, 2023, by and between Kreos Capital VI (Expert Fund) LP and PolyPid Ltd., filed as Exhibit 10.2 to Form 6-K (File No. 001-38428), filed on March 31, 2023, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390023025588/ea176210ex10-2_polypidltd.htm) |
| 4.19+ | [Second Amendment to the Agreement for the Provision of a Loan Facility of up to US$15,000,000 dated March 29, 2023, by and between Kreos Capital VI (Expert Fund) LP and PolyPid Ltd., filed as Exhibit 99.6 to Form 6-K (File No. 001-38428), filed on August 2, 2024, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-6_polypid.htm) |
| 4.20+ | [Third Amendment to the Agreement for the Provision of a Loan Facility of up to US$15,000,000 dated March 29, 2023, by and between Kreos Capital VI (Expert Fund) LP and PolyPid Ltd., filed as Exhibit 4.20 to Form 20-F (File No. 001-38428) filed on February 26, 2025, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390025017412/ea023153301ex4-20_polypid.htm) |
| 4.21+ | [License, Distribution and Supply Agreement, dated August 2, 2022, by and between PolyPid Ltd. and Mercury Pharma Group Limited, under the trade name Advanz Pharma Holdings, filed as Exhibit 10.1 to Form 6-K (File No. 001-38428), filed on August 8, 2022, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390022045399/ea163911ex10-1_polypidltd.htm) |
| 4.22 | [Form of Securities Purchase Agreement, dated March 29, 2023, by and between the Company and the purchasers named therein, filed as Exhibit 10.1 to Form 6-K (File No. 001-38428), filed on March 31, 2023, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390023025588/ea176210ex10-1_polypidltd.htm) |
| 4.23 | [Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated January 4, 2024, filed as Exhibit 99.2 to Form 6-K (File Number 001-38428), filed on January 5, 2024, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-2_polypid.htm) |

---

---

| | |
|:---|:---|
| 4.24 | [Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated January 4, 2024, filed as Exhibit 99.3 to Form 6-K (File Number 001-38428), filed on January 5, 2024, and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1611842/000121390024001325/ea191200ex99-3_polypid.htm). |
| 4.25 | [Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated August 1, 2024, filed as Exhibit 99.2 to Form 6-K (File Number 001-38428), filed on August 2, 2024, and incorporated by reference herein.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-2_polypid.htm) |
| 4.26 | [Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated August 1, 2024, filed as Exhibit 99.3 to Form 6-K (File Number 001-38428), filed on August 2, 2024, and incorporated by reference herein.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024064733/ea021043501ex99-3_polypid.htm) |
| 4.27 | [Form of Securities Purchase Agreement between PolyPid Ltd. and the investors named therein, dated December 23, 2024, filed as Exhibit 99.2 to Form 6-K (File Number 001-38428), filed on December 26, 2024, and incorporated by reference herein.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-2_polypid.htm) |
| 4.28 | [Form of Registration Rights Agreement between PolyPid Ltd. and the investors named therein, dated December 23, 2024, filed as Exhibit 99.3 to Form 6-K (File Number 001-38428), filed on December 26, 2024, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/1611842/000121390024112468/ea022575301ex99-3_polypid.htm) |
| 4.29 | [Form of Inducement Letter, filed as Exhibit 10.1 to Form 6-K (File Number 001-38428), filed on June 17, 2025, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390025054964/ea024598401ex10-1_polypid.htm) |
| 8.1 | [List of Subsidiaries, filed as Exhibit 8.1 to form 20-F (File No. 001-38428) filed on March 5, 2021 and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390021013722/f20f2020ex8-1_polypid.htm) |
| 11.1 | [Insider Trading Policy (filed herewith).](ea027672701ex11-1_polypid.htm) |
| 12.1 | [Certification of the Principal Executive Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).](ea027672701ex12-1_polypid.htm) |
| 12.2 | [Certification of the Principal Financial Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).](ea027672701ex12-2_polypid.htm) |
| 13.1 | [Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.](ea027672701ex13-1_polypid.htm) |
| 13.2 | [Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.](ea027672701ex13-2_polypid.htm) |
| 15.1 | [Consent of Kost, Forer, Gabbay & Kasierer, Certified Public Accountants (Israel), an independent registered public accounting firm and a member firm of EY (filed herewith).](ea027672701ex15-1_polypid.htm) |
| 97.1 | [Clawback Policy, filed as Exhibit 97.1 to Form 20-F (File No. 001-38428) filed on March 6, 2024 and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/1611842/000121390024020424/ea0200588ex97-1_polypid.htm) |
| 101 | The following financial information from the Registrant's Annual Report on Form 20-F for the year ended December 31, 2025 formatted in XBRL (eXtensible Business Reporting Language): (i) Report of Independent Registered Public Accounting Firm; (ii) Consolidated Balance Sheets; (iii) Consolidated Statements of Operations; (iv) Consolidated Statements of Changes in Convertible Preferred Shares and Shareholders' Equity (Deficit); (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements, tagged as blocks of text and in detail. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

+ Certain information contained in this Exhibit has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both not material and is the type of information that PolyPid Ltd. treats as private or confidential.

**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 filed on its behalf.

---

| | | |
|:---|:---|:---|
|  | **POLYPID LTD.** | **POLYPID LTD.** |
| Date: February 25, 2026 | **By:** | /s/ Dikla Czaczkes Akselbrad |
|  |  | Dikla Czaczkes Akselbrad |
|  |  | Chief Executive Officer and Director |

---

**POLYPID LTD.**

**AND ITS SUBSIDIARIES**

**CONSOLIDATED FINANCIAL STATEMENTS**

**AS OF DECEMBER 31, 2025**

**AUDITED**

**INDEX**

---

| | |
|:---|:---|
|  | **Page** |
| **[Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281)](#SS_001)** | **F-2 - F-3** |
| **[Consolidated Balance Sheets](#SS_002)** | **F-4 - F-5** |
| **[Consolidated Statements of Operations](#SS_004)** | **F-6** |
| **[Consolidated Statements of Changes in Shareholders' Equity](#SS_005)** | **F-7** |
| **[Consolidated Statements of Cash Flows](#SS_006)** | **F-8 - F-9** |
| **[Notes to Consolidated Financial Statements](#SS_007)** | **F-10 - F-35** |

---

**- - - - - - - - - - - - - - - - - - -**

---

| | | |
|:---|:---|:---|
| ![](fin_001.jpg) | **Kost Forer Gabbay & Kasierer**<br> 2 Pal-Yam Blvd. Eshel Bldg.<br> Haifa 3309502, Israel<br>| Tel: +972-4-8654000<br> Fax: +972-3-5633439<br> ey.com |

---

**Report of Independent Registered Public Accounting Firm**

To the Shareholders and Board of Directors of

POLYPID LTD.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of PolyPid Ltd. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

**The Company's Ability to Continue as a Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1c to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1c. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

![](fin_001.jpg)

---

| | |
|:---|:---|
|  | &nbsp;&nbsp;**Going Concern**  |
| *Description of the Matter* | &nbsp;&nbsp;As discussed in Note 1c in the consolidated financial statements, the Company has incurred operating losses and negative cash flow from operations since inception and expects to continue to incur substantial losses for the foreseeable future. The Company does not generate product revenue and continues to do certain development and manufacture activities in order to receive regulatory approval prior to commercialization. As a result, the Company's operations are dependent on its ability to raise additional funds. This dependency will continue until the Company is able to completely finance its operations by generating revenue from its products. On December 31, 2025, the Company's cash and cash equivalents position is not sufficient to fund the Company's planned operations for at least a year beyond the date of the issuance of the consolidated financial statements. Those factors raise substantial doubt about the Company's ability to continue as a going concern.<br>We determined the Company's ability to continue as a going concern is a critical audit matter due to the estimation and execution uncertainty regarding the Company's future cash flows and the risk of bias in management's judgments and assumptions in estimating these cash flows to conclude the Company would have sufficient liquidity to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions. |
| <br> *How We Addressed the Matter in Our Audit* | &nbsp;&nbsp; <br> Addressing the matter involved performing procedures and evaluating audit evidence in connection with our overall opinion on the consolidated financial statements. Our audit procedures included testing the completeness, accuracy, and relevance of underlying data used in the Company's assessment and evaluating the reasonableness of the assumptions included in the forecasted cash flows used in management's assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the issuance date of the consolidated financial statement.<br>We also compared the Company's historical forecast to its actual results to assess the Company's ability to accurately forecast and assess the sensitivity and impact of reasonably possible changes in the key assumptions and estimates included in management's cash flow forecasts and liquidity position.<br>In addition, we assessed the adequacy of the Company's disclosure included in Note 1c to the consolidated financial statements. |

---

---

| |
|:---|
| /s/ KOST FORER GABBAY & KASIERER |
| A Member of EY Global |

---

We have served as the Company's auditor since 2010.

Haifa, Israel

February 25, 2026

**POLYPID LTD. AND ITS SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**U.S. dollars in thousands** 

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**ASSETS** |  |  |
| CURRENT ASSETS: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $6402 | $15641 |
| &nbsp;&nbsp;&nbsp;Restricted deposits | 193 | 168 |
| &nbsp;&nbsp;&nbsp;Short-term deposits | 6531 |  |
| &nbsp;&nbsp;&nbsp;Pre-launch inventories | 1106 |  |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 995 | 764 |
| <u>Total</u> current assets | 15227 | 16573 |
| LONG-TERM ASSETS: |  |  |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 5094 | 6075 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 1675 | 2295 |
| &nbsp;&nbsp;&nbsp;Other long-term assets | 311 | 277 |
| <u>Total</u> long-term assets | 7080 | 8647 |
| <u>Total</u> assets | $22307 | $25220 |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**U.S. dollars in thousands (except share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| CURRENT LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Trade payables | $2856 | $2409 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 2734 | 2566 |
| &nbsp;&nbsp;&nbsp;Current maturities of long-term debt | 988 | 6787 |
| &nbsp;&nbsp;&nbsp;Current maturities of operating lease liabilities | 1161 | 919 |
| <u>Total</u> current liabilities | 7739 | 12681 |
| LONG-TERM LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Long-term debt | - | 634 |
| &nbsp;&nbsp;&nbsp;Deferred revenues | 2548 | 2548 |
| &nbsp;&nbsp;&nbsp;Long-term operating lease liabilities | 647 | 1277 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 400 | 396 |
| <u>Total</u> long-term liabilities | 3595 | 4855 |
| COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8) |  |  |
| SHAREHOLDERS' EQUITY: |  |  |
| &nbsp;&nbsp;&nbsp;Ordinary shares, no par value - Authorized: 107,800,000 shares at December 31, 2025 and 2024; Issued and outstanding: 18,204,002 and 10,190,904 shares at December 31, 2025 and 2024, respectively | - | - |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 312473 | 275015 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (301500) | (267331) |
| <u>Total</u> shareholders' equity | 10973 | 7684 |
| <u>Total</u> liabilities and shareholders' equity | $22307 | $25220 |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**U.S. dollars in thousands (except share and per share data)**

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| *Operating expenses:* |  |  |  |
| &nbsp;&nbsp;&nbsp;Research and development | $23807 | $22811 | $16148 |
| &nbsp;&nbsp;&nbsp;Marketing and business development | 1977 | 945 | 1196 |
| &nbsp;&nbsp;&nbsp;General and administrative | 7183 | 4273 | 5523 |
| Operating loss | 32967 | 28029 | 22867 |
| &nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | 512 | - | - |
| &nbsp;&nbsp;&nbsp;Financial expense, net | 685 | 951 | 929 |
| Loss before income tax | 34164 | 28980 | 23796 |
| &nbsp;&nbsp;&nbsp;Income tax expense | 5 | 42 | 69 |
| Net loss | $34169 | $29022 | $23865 |
| *Loss per share:* |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $2.09 | $4.91 | $16.99 |
| &nbsp;&nbsp;&nbsp;Diluted | $2.09 | $4.91 | $16.93 |
| *Weighted-average ordinary shares outstanding:* |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 16351890 | 5912890 | 1404368 |
| &nbsp;&nbsp;&nbsp;Diluted | 16351890 | 5912890 | 1421308 |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY** 

**U.S. dollars in thousands (except share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Number of<br> Ordinary<br> shares** |  | **Additional<br> paid-in<br> capital** | **Accumulated<br> deficit** | **Total <br> shareholders'<br> equity (deficit)** |
| Balances as of January 1, 2023 | 669605 | \*) | $220273 | $(214444) | $5829 |
| &nbsp;&nbsp;&nbsp;Share-based compensation |  |  | 3391 | - | 3391 |
| &nbsp;&nbsp;&nbsp;Issuance of ordinary shares, net (1) | 637660 |  | 8723 | - | 8723 |
| &nbsp;&nbsp;&nbsp;Issuance of pre-funded warrants, net (2) | - |  | 3987 | - | 3987 |
| &nbsp;&nbsp;&nbsp;Modification of warrants |  |  | 31 | - | 31 |
| &nbsp;&nbsp;&nbsp;Reclassification of pre-funded warrants to Liabilities |  |  | (2106) | - | (2106) |
| &nbsp;&nbsp;&nbsp;Reclassification of pre-funded warrants to Equity |  |  | 1905 | - | 1905 |
| &nbsp;&nbsp;&nbsp;Cashless exercise of pre-funded warrants | 345151 |  | - | - | - |
| &nbsp;&nbsp;&nbsp;Exercise of options | 1143 |  | 9 | - | 9 |
| &nbsp;&nbsp;&nbsp;Net loss | - |  | - | (23865) | (23865 |
| Balances as of December 31, 2023 | 1653559 |  | $236213 | $(238309) | $(2096) |
| &nbsp;&nbsp;&nbsp;Share-based compensation |  |  | 2824 | - | 2824 |
| &nbsp;&nbsp;&nbsp;Issuance of ordinary shares, warrants and pre-funded warrants, net (3) | 8537345 |  | 35863 | - | 35863 |
| &nbsp;&nbsp;&nbsp;Issuance of warrants (see Note 7) |  |  | 115 | - | 115 |
| &nbsp;&nbsp;&nbsp;Net loss | - |  | - | (29022) | (29022 |
| Balances as of December 31, 2024 | 10190904 |  | $275015 | $(267331) | $7684 |
| &nbsp;&nbsp;&nbsp;Share-based compensation |  |  | 4854 | - | 4854 |
| &nbsp;&nbsp;&nbsp;Issuance of ordinary shares, abeyance shares and warrants, net (4) | 5724022 |  | 32603 | - | 32603 |
| &nbsp;&nbsp;&nbsp;Exercise of pre-funded warrants | 1563701 |  | - | - | - |
| &nbsp;&nbsp;&nbsp;Issued abeyance shares | 725000 |  | - | - | - |
| &nbsp;&nbsp;&nbsp;Exercise of options | 375 |  | 1 | - | 1 |
| &nbsp;&nbsp;&nbsp;Net loss | - |  | - | (34169) | (34169 |
| Balances as of December 31, 2025 | 18204002 |  | $312473 | $(301500) | $10973 |

---

(1) Net of issuance costs of $757.

(2) Net of issuance costs of $362.

(3) Net of issuance costs of $2,894.

(4) Net of issuance costs of $227.

\*) The balance as of January 1, 2023, has been retroactively adjusted to reflect the 1-for-30 reverse share split effected on September 18, 2023 (see Note 10a).

---

| | |
|:---|:---|
| \*\*) | Represents an amount lower than $1. |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**U.S. dollars in thousands (except share data)**

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| <u>Cash flows from operating activities:</u> |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(34169) | $(29022) | $(23865) |
| &nbsp;&nbsp;&nbsp;&nbsp;*Adjustments to reconcile net loss to net cash used in operating activities:* |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation of property and equipment | 1458 | 1622 | 1822 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Remeasurement of warrants | - | - | (201) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-cash financial expenses, net | 213 | 697 | 1727 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt | 512 | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation expenses | 4854 | 2824 | 3391 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Changes in assets and liabilities:* |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pre-launch inventories | (1106) | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (225) | (315) | 641 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 907 | 824 | 593 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (675) | (723) | (494) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade payables | 180 | 1637 | (369) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other liabilities | 172 | 493 | (481) |
| Net cash used in operating activities | (27879) | (21963) | (17236) |
| <u>Cash flows from investing activities:</u> |  |  |  |
| &nbsp;&nbsp;&nbsp;Investment in bank deposits | (26216) | (21353) | (18600) |
| &nbsp;&nbsp;&nbsp;Proceeds from bank deposits | 19722 | 21099 | 22600 |
| &nbsp;&nbsp;&nbsp;Purchase of property and equipment | (210) | (76) | (196) |
| Net cash provided (used in) by investing activities | (6704) | (330) | 3804 |
| <u>Cash flows from financing activities:</u> |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of options | 1 | - | 9 |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of ordinary shares, warrants, pre-funded warrants and abeyance shares, net | 32603 | 35863 | 12710 |
| &nbsp;&nbsp;&nbsp;Payment due to long-term debt | (6376) | (3322) | (2618) |
| &nbsp;&nbsp;&nbsp;Payment of fees due to debt | (859) | (125) | (125) |
| Net cash provided by financing activities | 25369 | 32416 | 9976 |
| Increase (decrease) in cash, cash equivalents and restricted deposits | (9214) | 10123 | (3456) |
| Cash, cash equivalents and restricted deposits at the beginning of the year | $15809 | $5686 | $9142 |
| Cash, cash equivalents and restricted deposits at the end of the year | $6595 | $15809 | $5686 |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**U.S. dollars in thousands (except share data)**

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Supplemental disclosures of cash flows:** |  |  |  |
| Interest paid | $557 | $950 | $1038 |
| Cash paid during the year for income taxes | $5 | $3 | $18 |
| **<u>Supplemental disclosures of cash flow information:</u>** |  |  |  |
| Cash and cash equivalents | $6402 | $15641 | $5309 |
| Restricted deposits | 193 | 168 | 300 |
| Restricted deposits included in other long-term assets | - | - | 77 |
| Cash, cash equivalents and restricted deposits at the end of the year | $6595 | $15809 | $5686 |
| **<u>Supplemental disclosures of non-cash investing and financing information:</u>** |  |  |  |
| Property and equipment acquired by credit | $267 | $- | $- |
| Right-of-use asset recognized with corresponding lease liability | $287 | $1522 | $241 |
| Credit line derivative | $- | $100 | $127 |
| Modification of warrants | $- | $- | $31 |
| Warrants issued as part of credit line | $- | $115 | $- |

---

The accompanying notes are an integral part of the consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 1:- GENERAL

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. PolyPid Ltd. (the "Company") was incorporated under the laws of Israel and commenced operations on February 28, 2008. The Company is an innovative biopharmaceutical company dedicated to improving patient outcomes by elevating treatment effectiveness, right where care begins. The Company develops long-acting, controlled-release medicine designed to deliver therapy precisely at the site of care, addressing critical unmet medical needs across a wide and diverse pipeline spanning surgical care, metabolic diseases, and beyond. The Company's lead product, D-PLEX<sub>100</sub>, successfully met its primary and all key secondary endpoints in the pivotal Phase 3 Surgical site Hospital acquired Infection prEvention with Local D-PLEX<sub>100</sub> ("SHIELD II") trial for the prevention of surgical site infections ("SSIs"). Through December 31, 2025, the Company has been primarily engaged in research and development.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The
 Company's wholly owned subsidiaries include a subsidiary in the United States of America
 (the "US Subsidiary") and a subsidiary in Romania. The US Subsidiary's operation
 focuses on marketing and business development of the Company's operation in the United States
 of America.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The
 Company's activities since inception have consisted of performing research and development
 activities. Successful completion of the Company's development programs and, ultimately,
 the attainment of profitable operations is dependent on future events, including, among other
 things, its ability to secure financing; obtain marketing approval from regulatory authorities;
 access potential markets; build a sustainable customer base; attract, retain and motivate
 qualified personnel; and develop strategic alliances. The Company's operations are
 funded by its shareholders and research and development grants and the Company intends to
 seek further private or public financing as well as make applications for further research
 and development grants for continuing its operations. Although management believes that the
 Company will be able to successfully fund its operations, there can be no assurance that
 the Company will be able to do so or that the Company will ever operate profitably.

In June 2025, the Company announced positive top-line results from the SHIELD II Phase 3 trial. D-PLEX<sub>100</sub> successfully met the primary efficacy endpoint, with statistically significant results (p<0.005) in 798 patients with large abdominal surgery incisions. The trial successfully met all key secondary efficacy endpoints, including a 60% reduction in the rate of SSIs in patients treated with D-PLEX<sub>100</sub> arm versus standard of care arm (p<0.005). The Company intends to submit a New Drug Application ("NDA") on a rolling basis, by the end of the first quarter of 2026.

The Company expects to continue to incur substantial losses for the foreseeable future. To fully execute its business plan, the Company will need to do certain development activities as well as manufacture the required clinical and commercial production batches in the pilot manufacturing plant. Further, the Company's product candidates will require regulatory approval prior to commercialization, and the Company will need to establish sales, marketing and logistic infrastructures. These activities may span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company.

As of December 31, 2025, the Company had cash and cash equivalents in the total amount of $6,402. During the year ended December 31, 2025, the Company incurred a net loss of $34,169 and had negative cash flows from operating activities of $27,879. In addition, the Company had an accumulated deficit of $301,500 at December 31, 2025.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 1:- GENERAL (CONT.)

The Company's future operations are highly dependent on a combination of factors, including (i) completion of all required clinical studies; (ii) the success of its research and development activities; (iii) manufacture of all required clinical and commercial production batches; (iv) marketing approval by the relevant regulatory authorities; and (v) market acceptance of the Company's product candidates.

There can be no assurance that the Company will succeed in achieving the clinical, scientific and commercial milestones as detailed above.

Based on the abovementioned, as of the approval date of these consolidated financial statements, the Company has not raised the necessary funding in order to continue its activity for a period of at least one year after the date of the filing of this annual report on Form 20-F. The Company believes that the current cash balance will be sufficient to fund operations into the second half of 2026. Therefore, these factors raise a substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that might result should the Company be unable to continue as a going concern. Such adjustments could be material.

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared according to United States generally accepted accounting principles ("U.S. GAAP").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Use of estimates:

 ****

The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Consolidated financial statements in U.S. dollars:

 ****

The accompanying consolidated financial statements have been prepared in United States of America dollars ("$" or "U.S. dollars").

A substantial portion of the Company's expenses are incurred in New Israeli Shekels ("NIS"). However, the Company finances its operations mainly in U.S. dollars, a substantial portion of its expenses are incurred in U.S. dollars and potential revenues from its primary markets are anticipated to be generated in U.S. dollars. As such, the Company's management believes that the U.S. dollar is the currency of the primary economic environment in which the Company and its subsidiaries operate. Thus, the functional and reporting currency of the Company is the U.S. dollar.

Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts maintained in currencies other than the dollar are re-measured into U.S. dollars in accordance with Accounting Standards Codification ("ASC") No. 830, "*Foreign Currency Matters*". All transaction gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Principles of consolidation:

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances have been eliminated upon consolidation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Cash equivalents:

 ****

Cash equivalents are short-term, highly liquid investments that are readily convertible into cash with an original maturity of three months or less, at the date acquired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Restricted deposits:

Restricted cash is primarily invested in a bank deposit and is used as security for the Company's lease commitments and for its forward and options transactions activities (see Note 2p).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Short-term deposits:

A short-term bank deposit is a deposit with a maturity of more than three months, but less than one year. Short-term deposits are presented at cost, which approximates market value due to their short maturities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Pre-launch inventories:

The Company capitalized pre-launch inventories prior to receiving regulatory approval since regulatory approval and subsequent commercialization of a product are considered probable and because future economic benefits from product sales are expected to be realized.

Pre-launch inventories that are capitalized consist exclusively of raw materials intended for use in future commercial manufacturing batches and do not include work-in-process or finished goods. In assessing whether pre-launch inventory should be capitalized, the Company considered a number of specific facts and circumstances, including the product's shelf life, the product's current status in the development and regulatory approval process (NDA to be submitted on a rolling basis beginning by the end of the first quarter of 2026), the viability of commercialization, and relevant market trends.

Towards the end of 2025, following the top-line results received in June 2025 and based on the Company's assessment of the regulatory process related to D-PLEX<sub>100</sub>, the Company concluded that the criteria to capitalize expenditures for pre-launch inventory were met. As a result, the Company capitalized $1,106 of pre-launch inventories as of December 31, 2025.

If regulatory approval or market acceptance following approval of D-PLEX<sub>100</sub> does not occur, or does not occur on a timely basis prior to the expiration of the related raw material shelf life, the Company may be required to write off some or all of the capitalized pre-launch inventories, which could adversely affect the Company's financial condition and results of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. Segment reporting:

The Company identifies operating segments in accordance with ASC No. 280, "Segment Reporting", as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and evaluating financial performance. The Company's chief operating decision maker ("CODM") is its chief executive officer, who manages the Company's business activities as a single operating and reportable segment on a consolidated basis. Accordingly, the CODM uses consolidated net loss to assess financial performance and allocate resources. The CODM reviews and utilizes functional expenses (research and development, sales and marketing, and general and administrative) at the consolidated level as presented in the Company's consolidated statements of operations, to manage the Company's operations. Other financial information regarding the Company's operating segment is presented elsewhere in consolidated financial statements.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Property and equipment, net:

 ****

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following rates:

---

| | |
|:---|:---|
|  | **%** |
| Computers and software | 33 |
| Laboratory equipment | 10 - 15 |
| Furniture and office equipment | 15 |
| Leasehold improvements | *Over the shorter of the term of <br> the lease or its useful life* |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. Leases:

The Company adopted ASC No. 842, "*Leases*", which requires the recognition of lease assets and lease liabilities by lessees for leases classified as operating leases. The Company determines if an arrangement is a lease at inception. The Company's assessment is based on: (1) whether the contract includes an identified asset, (2) whether the Company obtains substantially all of the economic benefits from the use of the asset throughout the period of use, and (3) whether the Company has the right to direct how and for what purpose the identified asset is used throughout the period of use.

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset, the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term. A lease is classified as an operating lease if it does not meet any one of these criteria.

Since all of the Company's lease contracts do not meet any of the criteria above, the Company concluded that all of its lease contracts should be classified as operating leases.

Right-of-use ("ROU") assets and liabilities are recognized on the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available on the commencement date in determining the present value of lease payments. All ROU assets are reviewed for impairment. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company also elected the practical expedient to not separate lease and non-lease components for its leases. The Company elected to not recognize a lease liability and a ROU asset for lease with a term of twelve months or less.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. Impairment of long-lived assets:

 ****

The Company's long-lived assets are reviewed for impairment in accordance with ASC No. 360, "*Property, Plant and Equipment*", whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset (assets group) to the future undiscounted cash flows expected to be generated by the asset. If such asset (assets group) is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset (assets group) exceeds its fair value.

As of December 31, 2025 and 2024, no impairment losses have been identified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. Research and development, net expenses:

Research and development expenses consist of personnel costs (including salaries, benefits and share-based compensation), materials, consulting fees and payments to subcontractors, chemical, manufacturing and control activities, costs associated with obtaining regulatory approvals, executing pre-clinical and clinical studies and maintenance and prosecution of the Company's intellectual property rights. In addition, research and development expenses include overhead allocations consisting of various administrative and facilities related costs. The Company charges research and development expenses as expenses when incurred and are presented net of government grants (see Note 2m).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m. Grants and participations:

Royalty-bearing grants from the Israeli Innovation Authority ("IIA") of the Ministry of Economy and Industry in Israel for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. Non-royalty-bearing grants from the IIA MAGNET program and from European Commission's Seventh Framework Programme for Research ("FP7") for funding approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses.

Since the payment of royalties is not probable when the grants are received, the Company does not record a liability for amounts received from IIA until the related revenues are recognized. In the event of failure of a project that was partly financed by IIA, the Company will not be obligated to pay any royalties or repay the amounts received.

The Company recognizes participations in research and development, as a reduction from research and development expenses in the amount of $0, $0 and $83 for the years ended December 31, 2025, 2024, and 2023, respectively.

From inception up until December 31, 2025, the Company received a total of $7,290 in grants, out of which royalty-bearing grants in the amount of $4,888 from the IIA, non-royalty bearing grants in the amount of $1,675 from the IIA and non-royalty bearing grants in the amount of $727 from the FP7.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n. Accounting for share-based compensation:

Share-based compensation expense related to share-based awards is recognized based on the fair value of the awards granted and recognized as an expense on a straight-line basis over the requisite service period for awards subject to graded vesting based only on a service condition and the accelerated method for awards that are subject to performance or condition.

The fair value of each option award is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected term of the award, the expected volatility of the price of the Company's ordinary shares, risk-free interest rates, and the expected dividend yield of ordinary shares. The assumptions used to determine the fair value of the share awards represent management's best estimates. These estimates involve inherent uncertainties and the application of management's judgment. Forfeitures are accounted for as they occur instead of estimating the number of awards expected to be forfeited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o. Basic and diluted net loss per share:

The Company's basic net loss per share is calculated by dividing the net loss attributable to ordinary shareholders by the weighted-average number of shares of ordinary shares outstanding for the period, without consideration of potentially dilutive securities. The diluted net loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of ordinary shares are anti-dilutive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. Fair value of financial instruments:

The Company applies ASC No. 820, "Fair Value Measurements and Disclosures" ("ASC 820"), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Fair value is an exit price, representing the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. Fair
 value of financial instruments: (Cont.)

A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

---

| | |
|:---|:---|
| Level 1 - | Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities. |
| Level 2 - | Include other inputs that are directly or indirectly observable in the marketplace. |
| Level 3 - | Unobservable inputs which are supported by little or no market activity |

---

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying amounts of cash and cash equivalents, restricted deposits, short-term deposits, prepaid expenses and other current assets, other long-term assets, trade payables, accrued expenses and other current and non-current liabilities approximate their fair value due to the short-term maturity of such instruments.

The fair value measurement of the Financial Component Asset ("FCA") is measured using unobservable inputs that require a high level of judgment to determine fair value, and thus is classified as a Level 3 financial instrument. The Company estimates the fair value of the abovementioned instrument using the Monte-Carlo simulation and the Black-Scholes option pricing model.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q. Derivative financial instruments:

The Company accounts for derivatives based on ASC 815. ASC 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The Company enters into option and forward contracts in order to limit the exposure to exchange rate fluctuation associated with expenses mainly incurred in NIS. Since the derivative instruments that the Company holds were not designated as hedging instruments under ASC 815, any gain or loss derived from such instruments is recognized immediately as "financial expense, net".

The Company measured the fair value of the contracts in accordance with ASC 820. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. As of December 31, 2025 and 2024, the fair value of the options and forward contracts was $16 and $0, respectively. Financial expense (income) for the years ended December 31, 2025, 2024 and 2023, amounted to $(11), $(19) and 75, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r. Income taxes:

The Company accounts for income taxes in accordance with ASC No. 740, "*Income Taxes*" ("ASC 740"). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r. Income
 taxes: (Cont.)

The Company provides a valuation allowance to reduce deferred tax assets to their estimated realizable value, if needed.

ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

As of December 31, 2025 and 2024, the Company's uncertain tax position liability was $208. The Company's policy is to accrue interest and penalties related to unrecognized tax benefits in its taxes on income.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s. Revenue recognition:

The Company recognizes revenue from contracts with customers under ASC No. 606, "*Revenue from Contracts with Customers*". Accordingly, the Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.

To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligations.

At contract inception, the Company assesses the goods or services agreed upon within each contract and assesses whether each good or service is distinct to determine the performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

On August 2, 2022, the Company entered into a license, distribution and supply agreement (the "Agreement") with Mercury Pharma Group Limited, under the trade name Advanz Pharma Holdings (the "Customer"), with respect to the Company's product, the D-PLEX<sub>100</sub> (the "Product"), for the prevention of (i) post abdominal surgery incisional infection; and/or (ii) post cardiac surgery sternal infection.

The term of the Agreement is until the later of December 31, 2035, or 10 years after the first commercial sale of the Product. The Agreement can also be terminated by either party under certain limited circumstances. Pursuant to the Agreement, the Customer was granted an exclusive license to market, commercialize, and distribute the Product in the European Economic Area and in the United Kingdom. Under the Agreement, the Company will carry out all activities required to obtain marketing authorization in each territory, approving the commercial sale of the Product in that territory. Once marketing authorization will be granted in a territory, the Customer will be required to achieve minimum sales requirements for that territory.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s. Revenue
 recognition: (Cont.)

Under the terms of the Agreement, the Company received a non-refundable, one-time payment of €2.5 million (approximately $2,548). The Company is also entitled to receive additional development-related milestones payments for a total of up to €23 million. In addition, the Company will be entitled to receive up to additional €87 million upon achievement of certain commercial sale milestones.

The Company has concluded that the Agreement includes a single performance obligation. The Company has concluded that the license and development are not distinct from the manufacturing since the Customer could not use, consume, or sell the license and development services on their own or with resources readily available to the Customer because of the Company's specialized knowledge and the associated manufacturing know-how and because currently, and in the foreseeable future, there are no other parties that could manufacture the Product. As such, the transaction price was fully allocated to the single performance obligation. Since it is not probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the milestone payments is resolved, the Company estimated the transaction price at €2.5 million (approximately $2,548).

As of December 31, 2025, the Company has yet to satisfy its performance obligation under the Agreement and, therefore, no revenues were recognized. Accordingly, the upfront payment amount was classified as a long-term deferred revenue in the Company's consolidated balance sheet as of December 31, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;t. Concentration of credit risks:

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, short-term deposits and restricted deposits. Cash, cash equivalents, short-term deposits and restricted deposits are deposited in major banks in Israel and in the United States of America. Such investments may be in excess of insured limits or not insured. Generally, cash and cash equivalents may be redeemed upon demand and, therefore, bear minimal risk.

The Company utilizes option and forward contracts to protect against the risk of overall changes in exchange rates. The derivative instruments hedge a portion of the Company's non-dollar currency exposure. Counterparties to the Company's derivative instruments are all major financial institutions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;u. Severance pay:

All the Company's employees who are Israeli citizens have subscribed to Section 14 of Israel's Severance Pay Law, 5723-1963 ("Section 14"). Pursuant to Section 14, employees covered by this section are entitled to monthly deposits at a rate of 8.33% of their monthly salary, made on their behalf by the Company. Payments in accordance with Section 14 release the Company from any future severance liabilities in respect of those employees. Neither severance pay liability nor severance pay fund under Section 14 for such employees is recorded on the Company's consolidated balance sheets. Severance pay expense for the years ended December 31, 2025, 2024 and 2023, amounted to $476, $404 and $401, respectively.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;u. Severance
 pay: (Cont.)

The US Subsidiary has a Safe Harbor 401(k) plan covering all the US Subsidiary employees. All eligible employees may elect to contribute up to 100% of their payroll compensation (minus mandatory payroll deductions) to the plan, for 2025, up to a maximum of $24 per year (for employees over 50 years of age the maximum contribution was $31 per year), as determined by the U.S. Internal Revenue Service ("IRS"). The US Subsidiary matches at 100%, on each payroll, up to 5% of the employee compensation to the plan within the IRS limits (which was set at $350 in 2025 for purposes of the plan).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. Contingent liabilities:

The Company accounts for its contingent liabilities in accordance with ASC No. 450, "*Contingencies*". A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The Company is occasionally a party to routine claims or litigation incidental to its business. The Company does not believe that it is a party to any pending legal proceeding that is likely to have a material adverse effect on its business, financial condition or results of operations. The Company recorded an accrual in the consolidated statement of operations, which it deems appropriate.

As of December 31, 2025 and 2024, no liability due to legal matters has been accrued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;w. Recently adopted accounting pronouncements:

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation, as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 during the year ended December 31, 2025, on a prospective basis. The adoption of this ASU affected only the Company's disclosures to its consolidated financial statements (refer to Note 9e).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;x. Recently issued accounting pronouncements not yet adopted:

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses. The ASU requires, among other items, additional disaggregated disclosures in the notes to the financial statements for certain categories of expenses that are included in the consolidated statements of operations. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the effect of adopting the ASU on its disclosures.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;x. Recently
 issued accounting pronouncements not yet adopted: (Cont.)

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU provides a practical expedient to measure credit losses on current accounts receivable and contract assets under ASC No. 606, "Revenue from Contracts with Customers." The practical expedient assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. For public business entities, ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption of ASU 2025-05 is permitted. The Company is currently evaluating the effect of adopting the ASU on its disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) - Narrow-Scope Improvements. The ASU was updated to improve the navigability of the required interim disclosures within ASC No. 270 and to clarify when the guidance applies. This ASU is not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements. The amendments in this ASU are required to be adopted for interim reporting periods beginning after December 15, 2027, with early adoption permitted, and may be applied either through a prospective or retrospective approach. The Company is currently evaluating the effect of adopting the ASU on its condensed consolidated financial statement disclosures.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The update provides recognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related to an asset and grants related to income. The amendments introduced two permitted approaches for asset-related grants: a deferred income approach or a cost accumulation approach. The guidance is effective for the Company beginning January 1, 2029, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statement.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 3:- PREPAID EXPENSES AND OTHER CURRENT ASSETS

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Government authorities | $605 | $166 |
| Prepaid expenses | 363 | 330 |
| Other current assets | 27 | 268 |
|  | $995 | $764 |

---

NOTE 4:- PROPERTY AND EQUIPMENT, NET

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Cost: |  |  |
| Computers and software | $775 | $630 |
| Laboratory equipment | 8441 | 8167 |
| Furniture and office equipment | 188 | 173 |
| Leasehold improvements | 6567 | 6524 |
|  | 15971 | 15494 |
| Less - Accumulated depreciation | (10877) | (9419) |
| Depreciated cost | $5094 | $6075 |

---

Depreciation expenses amounted to $1,458, $1,622 and $1,822 for the years ended December 31, 2025, 2024 and 2023, respectively.

The majority of the Company's property and equipment is located in Israel.

NOTE 5:- LEASES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The
 Company's facilities are leased under operating lease agreements for periods ending no later
 than 2027.

On January 14, 2024, the Company entered into a new lease agreement for one of its premises, with the lease term extending through July 2027. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods, where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

The Company has bank guarantees in connection with the facilities lease agreements in the total amount of $298. Accordingly, cash, in the same amount, was restricted in bank deposits. The Company also leases motor vehicles under various operating leases, the latest of which expires in 2028.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The weighted average remaining lease term as of December 31, 2025 and 2024, is 1.64 and 2.50 years, respectively.

Weighted average discount rate as of December 31, 2025 and 2024, is 10.63% and 10.40%, respectively.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 5:- LEASES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The components of operating lease expense for the years ended December 31, 2025, 2024 and 2023 were $1,103, $1,042 and $1,170, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Lease liability as of December 31, 2025, is as follows:

---

| | |
|:---|:---|
| 2026 | 1229 |
| 2027 | 678 |
| 2028 | 36 |
| Total undiscounted lease payments | 1943 |
| Less - imputed interest | (135) |
| Present value of lease liabilities | $1808 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. The following table presents supplemental cash flow information related to the lease costs for operating leases as of December 31, 2025:

---

| | |
|:---|:---|
| *Cash paid for amounts included in measurement of lease liability:* |  |
| &nbsp;&nbsp;&nbsp;Operating cash flows for operating leases | $1129 |

---

The following table presents supplemental cash flow information related to the lease costs for operating leases as of December 31, 2024:

---

| | |
|:---|:---|
| *Cash paid for amounts included in measurement of lease liability:* |  |
| &nbsp;&nbsp;&nbsp;Operating cash flows for operating leases | $900 |

---

NOTE 6:- ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Employees and payroll accruals | $2379 | $1079 |
| Accrued expenses | 347 | 1464 |
| Other liabilities | 8 | 23 |
|  | $2734 | $2566 |

---

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 7:- LINE OF CREDIT ARRANGEMENT

On April 5, 2022, the Company entered into a secured line of credit agreement for up to $15,000 (the "Credit Line") with Kreos Capital VI (Expert Fund) LP ("Kreos"). The Credit Line is comprised of three tranches in the amount of $10,000, $2,500 and $2,500, respectively, in which the first tranche and in the amount of $10,000 (the "First Tranche") and the second tranche in the amount of $2,500 (the "Second Tranche) were drawn on April 26, 2022 and July 19, 2022, respectively. In addition, in accordance with the Credit Line agreement, the Company will issue to Kreos warrants to purchase the Company's ordinary shares equal to 8% of the amount of each tranche, when and if borrowed, with an exercise price of $154.05 per share. The expiration date for each warrant issued will be seven years from the agreement date.

Accordingly, as a result of the First Tranche and Second Tranche withdrawal, the Company issued to Kreos warrants to purchase 6,491 ordinary shares of the Company, at an exercise price of $154.05 per share.

On each drawdown date, the Company shall pay to Kreos on the drawdown date the last period payment for such drawdown. For the First Tranche and Second Tranche, the amount the Company paid was $317 and $85, respectively. The third and final tranche of $2,500 will never be drawn since the third tranche milestone has not been met.

The Company has concluded that the Credit Line includes several legally detachable and separately exercisable freestanding financial instruments: The First Tranche term loan, the warrants, and the right to receive additional loan tranches that was recognized as FCA.

The Company has concluded that the warrants should be classified as equity since the warrants are not an ASC 480 liability, are indexed to the Company's own ordinary share and meet all the equity classification conditions pursuant to ASC 815-40. The Company has also concluded that the FCA is not indexed to the Company's own ordinary share and should be measured at fair value, with changes in fair value recognized in earnings. In addition, the First Tranche and the Second Tranche term loan were accounted for using the effective interest method.

The Company allocated the proceeds received to the FCA at fair value. The remaining proceeds were allocated between the warrants and the First Tranche term loan using the relative fair value method. The proceeds allocation resulted in $9,532 allocated to the First Tranche and $468 allocated to the warrants, net of issuance costs. The proceeds allocated to the FCA were immaterial.

The Company allocated the proceeds received under the Credit Line between the warrants and the Second Tranche term loan using the relative fair value method. The proceeds allocation resulted in $2,380 allocated to the Second Tranche and $120 allocated to the warrants.

On March 29, 2023, the Company entered into an amendment to the Credit Line (the "Amendment"). Pursuant to the Amendment, 70% of the remaining principal and interest repayments was to be delayed and repaid on a monthly equal basis from August 2024 to May 2026. The amended secured Credit Line bore interest at the rate of 10%. In addition, the Company paid to Kreos a restructuring fee consisting of 1% on the closing date of the Amendment and will pay an incremental 3% at the maturity of the Amendment. In return for this additional deferral of repayment, Kreos has the right to receive a potential claw-back payment on account of the then outstanding principal amount (the "Claw-Back"). This Claw-Back mechanism will be triggered by additional incoming funds from future collaboration and partnership agreements or additional funding. If triggered, the minimum Claw-Back to be paid was $1,500, but was not to exceed $3,000. During the first quarter of 2024, the Company repaid $1,500 due to the Claw-Back.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 7:- LINE OF CREDIT ARRANGEMENT (CONT.)

Further to the above, the warrants to purchase 6,491 ordinary shares of the Company issued to Kreos were repriced and as a result bear an exercise price of $12.60 per share. As a result of the modification, the Company recorded an incremental value in the amount of $31, that was calculated based on the Black-Scholes option pricing model, which increased the additional paid-in capital against an offset of the long-term debt due to the Credit Line.

On August 1, 2024, the Company entered into a second amendment (the "Second Amendment") to the Credit Line. Pursuant to the Second Amendment, 60% of the remaining principal and interest repayments under the Credit Line will be delayed and repaid on a monthly equal basis from April 1, 2025.

The amended secured Credit Line now bears interest at a rate of 12.00%, and the Company will pay a restructuring fee to Kreos of $125. In return for this additional deferral of repayment, Kreos has the right to receive a potential Claw-Back.

The Claw-Back to be paid will not exceed $4,500, out of which $1,904 was already paid as of December 31, 2024. As part of the Second Amendment, the Company issued to Kreos a warrant to purchase 40,000 ordinary shares of the Company at an exercise price of $3.61 per share.

The Company evaluated the amendments under ASC 470-50, "*Debt - modification and extinguishment*", and concluded that the terms of the new debt and the original debt are not substantially different, therefore the debt restructuring is accounted as debt modification where no gain or loss was recognized.

On January 6, 2025, the Company entered into an amendment to the Credit Line (the "Third Amendment"). Pursuant to the Third Amendment, 60% of the principal and interest repayments which were originally scheduled to be paid until the end of June 2025, were delayed and were repaid in July 2025. The Company paid a restructuring fee to Kreos of $160 and the end of loan payment was increased from 5% to 7%.

On January 8, 2025, and on July 4, 2025, the Company repaid $724 and $1,335, respectively, due to the Claw-Back. The Claw-Back to be paid will not exceed $4,500, out of which $3,963 was already paid as of December 31, 2025.

The Company evaluated the Third Amendment under ASC 470-50, "Debt - modification and extinguishment", and concluded that the change in the debt instrument was accounted for as an extinguishment of debt due to the terms of the new debt and the original debt being substantially different. At the date of extinguishment, the Company derecognized the carrying amount of old debt of $7,421 and recorded the new debt at the fair value of $7,933, resulting in a $512 loss.

The Credit Line is denominated in U.S. dollars and bears interest at an annual rate equal to 9.25% until the First Amendment, 10% from the First Amendment to the Second Amendment, and 12% From the Second Amendment. The interest paid due to the Credit Line for the years ended December 31, 2025 and 2024 amounted to $557 and $950, respectively.

During the years ended December 31, 2025, 2024 and 2023, the Company recognized $873, $1,651 and $1,685 of interest expenses related to the Credit Line, respectively, which were included as part of financial expenses in the Company's statements of operations.

In addition, the Company's debt includes the Claw-Back feature, which meets the definition of embedded derivative under ASC 815 And was not clearly and closely related to the debt host. Consequently, the embedded derivative was bifurcated and accounted for separately at fair value.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 7:- LINE OF CREDIT ARRANGEMENT (CONT.)

The fair value of the derivative amounted to $0 and $19 as of December 31, 2025 and December 31, 2024, respectively. Changes in the fair value of the derivative liabilities are determined at each period end. The liability due to the derivative was classified under other long-term liabilities in the consolidated balance sheet as of December 31, 2024.

The Company incurred debt restructuring costs, which were fully paid in cash, and are presented as a direct deduction against the carrying amount of the debt and amortized to interest expense using the effective interest method.

NOTE 8:- COMMITMENTS AND CONTINGENT LIABILITIES

In connection with its research and development programs, through December 31, 2025, the Company received participation payments from the IIA in the aggregate amount of $4,888. In return for the IIA's participation, the Company is committed to pay royalties at a rate of 3% of sales of the developed products, up to 100% of the amount of grants received plus interest at SOFR rate. Through December 31, 2025, no royalties have been paid or accrued.

NOTE 9:- INCOME TAXES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Corporate
 tax rates:

The corporate tax rate in Israel in 2025, 2024 and 2023 was 23%.

The United States of America ("USA") federal rate was 21% and the state corporate income tax rates range from 6.5% to 11.5% for the years ended December 31, 2025, 2024 and 2023. The Company is subject to USA income tax laws. There are no provisions for United States of America federal, state or other taxes for any period.

*Loss before taxes is comprised as follows:*

 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| Domestic (Israel) | $33228 | $28567 | $23348 |
| Foreign (USA) | 936 | 413 | 448 |
|  | $34164 | $28980 | $23796 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Net
 operating losses carryforward:

The Company has accumulated losses for tax purposes as of December 31, 2025, in the amount of approximately $257,690 which may be carried forward and offset against taxable income in the future for an indefinite period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Tax
 assessment:

The Company has net operating losses from prior tax periods which may be subjected to examination in future periods. As of December 31, 2025, the Company's tax years until December 31, 2020, are subject to the statute of limitation in Israel.

The US Subsidiary has yet to receive final tax assessments since its incorporation.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 9:- INCOME TAXES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Deferred taxes:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company's deferred tax assets are comprised of operating loss carryforwards and other temporary differences. Significant components of the Company's deferred tax assets are as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| *Deferred tax assets:* |  |  |
| &nbsp;&nbsp;&nbsp;Carryforward losses | $59269 | $45753 |
| &nbsp;&nbsp;&nbsp;Research and development expenses | 5511 | 4249 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 416 | 505 |
| &nbsp;&nbsp;&nbsp;Reserves and allowances | 420 | 187 |
| Deferred tax assets before valuation allowance | 65616 | 50694 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | (65230) | (50166) |
| Total deferred tax assets | 386 | 528 |
| *Deferred tax liabilities:* |  |  |
| &nbsp;&nbsp;&nbsp;Operating lease ROU assets | (386) | (528) |
| Total deferred tax liabilities | (386) | (528) |
| Net deferred tax assets, net | $- | $- |

---

Management currently believes that since the Company has a history of losses, and there is uncertainty with respect to future taxable income of the Company, it is more likely than not that the deferred tax assets will not be utilized in the foreseeable future. Thus, a full valuation allowance was provided to reduce deferred tax assets to their realizable value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Income taxes:

Income taxes are comprised of current tax expenses, all foreign (USA), federal and state, which amounted to $5 and $42 for the years ended December 31, 2025 and 2024, respectively.

During 2025 the amounts of cash income taxes paid by the Company were $5, all foreign (USA), federal and state.

For 2025 and 2024, prior to the adoption of ASU 2023-09, the main reconciling items of the Company's statutory tax rate of 23% and the effective tax rate of (0.01)% and (0.1)%, respectively, were tax carryforward losses and other temporary differences, such as research and development expenses, for which a full valuation allowance was provided.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 9:- INCOME TAXES (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Income taxes: (Cont.)

*A reconciliation of the provision for income taxes to the amount computed by applying the 23% statutory Israeli income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:*

---

| | | |
|:---|:---|:---|
|  | **Year Ended**<br>**December 31, 2025** | **Year Ended**<br>**December 31, 2025** |
|  | **USD In<br> Thousands** | **Percent** |
| Tax at Israeli Statutory Rate | (7858) | 23% |
| &nbsp;&nbsp;&nbsp;Changes in Valuation Allowances | 7044 | 21% |
| &nbsp;&nbsp;&nbsp;Nontaxable and Nondeductible Items |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based payment awards | 1040 | 3% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other adjustments | (24) | 0% |
| &nbsp;&nbsp;&nbsp;Foreign Tax Effects |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;USA |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Othe adjustments | (197) | 1% |
| Effective Tax Rate | $5 | 0% |

---

NOTE 10:- SHAREHOLDERS' EQUITY

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Reverse Share Split:

On September 18, 2023, the Company's board of directors approved a 1-for-30 reverse share split. No fractional shares were issued, and no cash or other consideration was paid as a result of the reverse share split. Instead, the Company issued one additional whole share of the post-reverse share split ordinary share to any shareholder who otherwise would have received a fractional share as a result of the reverse share split. The amount of authorized ordinary shares was not affected. All issued and outstanding share and per share amounts included in the accompanying consolidated financial statements have been adjusted to reflect this reverse share split for all periods presented.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Ordinary share capital (with no par value each) following the reverse share split is composed as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2024** | **December 31, 2024** |
|  | **Authorized** | **Issued and <br> outstanding** | **Authorized** | **Issued and <br> outstanding** |
|  | **Number of shares** | **Number of shares** | **Number of shares** | **Number of shares** |
| Ordinary shares | 107800000 | 18204002 | 107800000 | 10190904 |

---

**POLYPID LTD. AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Controlled Equity Offering Sales Agreement (the "Sales Agreement"):

In November 2024, the Company entered into a Sales Agreement, with Oppenheimer & Co. Inc. (the "Agent").

Pursuant to the Sales Agreement, the Company may offer and sell, from time to time, its ordinary shares, through the Agent in an at the market offering ("ATM'"), as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, for an aggregate offering price of up to $15,000 on November 26, 2025.

During the year ended December 31, 2024, the Company sold 464 ordinary shares under the ATM for a total amount of $2.

During the year ended December 31, 2025, the Company sold 1,650,827 ordinary shares under the ATM for a total amount of $5,913, net of issuance cost in the amount of $223.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Private placements and public offerings:

On January 4, 2024, the Company entered into a definitive securities purchase agreement for a private placement financing, led by leading U.S. life sciences-focused investors and certain existing investors. Under the securities purchase agreement, the investors purchased 3,143,693 of the Company's ordinary shares at a purchase price of $4.81 per share, pre-funded warrants to purchase up to 227,619 ordinary shares at an exercise price of $0.0001 per share and warrants to purchase up to 3,371,312 ordinary shares at an exercise price of $5.50 per share (the "January 2024 Warrants"). The January 2024 Warrants expire upon the earlier of two years from the date of issuance and 10 trading days following the Company's announcement of the positive recommendation by Data Safety Monitoring Board regarding the Company's unblinded interim analysis in its SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> resulting in the stopping of the trial due to positive efficacy. The proceeds to the Company amounted to $15,002, net of issuance cost of $1,216.

Exercise of the warrants in full would result in an additional $18,542 in proceeds to the Company. The closing of the offering occurred on January 9, 2024.

On May 20, 2025, the 227,619 pre-funded warrants were exercised to 227,619 ordinary shares.

On June 16, 2025, 2,190,121 January 2024 Warrants were exercised as part of the Inducement Letter as defined below.

In accordance with ASC 480 and ASC 815, the pre-funded warrants and the warrants were qualified for equity accounting. The fair value for each warrant to purchase an ordinary share is $4.52.

On August 1, 2024, the Company entered into a definitive securities purchase agreement for a private placement financing. Under the securities purchase agreement, the investors purchased 2,006,226 of the Company's ordinary shares at a purchase price of $3.61 per share, pre-funded warrants to purchase up to 229,231 ordinary shares at an exercise price of $0.0001 per share and warrants to purchase up to 1,676,588 ordinary shares at an exercise price of $3.61 per share (the "August 2024 Warrants").

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Private placements and public offerings: (Cont.)

The August 2024 Warrants expire upon the earlier of two years from the date of issuance and 10 trading days following the Company's announcement of the recommendation by the DSMB regarding the Company's unblinded interim analysis in its SHIELD II Phase 3 trial of D- PLEX<sub>100</sub> resulting in either the stopping of the trial due to positive efficacy, or continuation to planned patient recruitment (up to 630 subjects). The closing of the offering occurred on August 6, 2024. The proceeds to the Company amounted to approximately $7,536, net of issuance costs of $532. Exercise of the warrants in full would result in an additional $6,052 in proceeds to the Company.

In June 2025 the 229,231 pre-funded warrants were exercised to 229,230 ordinary shares.

On December 26, 2024, the Company entered into a definitive securities purchase agreement for a private placement financing. Under the securities purchase agreement, the investors purchased 3,386,962 of the Company's ordinary shares, at a purchase price of $3.22 per share, pre-funded warrants to purchase up to 1,106,868 ordinary shares at an exercise price of $0.0001 per share and warrants to purchase up to 6,740,745 ordinary shares at an exercise price of $4.00 per share (the "December 2024 Warrants"). The December 2024 Warrants expire upon the earlier of nine months from the date of issuance and 10 trading days following the Company's announcement of the top-line results in the Company's SHIELD II Phase 3 trial of D-PLEX<sub>100</sub>. The closing of the offering occurred on December 26, 2024. The offering resulted in proceeds to the Company of $13,325, net of issuance costs of $1,146. Exercise of the warrants in full would result in an additional $26,963 in proceeds to the Company.

On June 16, 2025, 5,436,393 December 2024 Warrants were exercised as part of the Inducement Letter as defined below and on June 23, 2025, 10 trading days following the Company's announcement of the top-line results in the Company's SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> the remaining 1,304,352 warrants expired.

On June 9, 2025, and September 4, 2025, 513,517 and 593,351, pre-funded warrants were exercised to 513,501 and 593,351 ordinary shares, respectively.

On June 16, 2025, the Company entered into an inducement offer letter agreement (the "Inducement Letter") with certain holders (each, a "Holder") of (i) 2,190,121 January 2024 Warrants to purchase up to 2,190,121 of the Company's ordinary shares and (ii) 5,436,393 December 2024 Warrants to purchase up to 5,436,393 ordinary shares (together with the January 2024 Warrants, the "Existing Warrants"). Pursuant to the Inducement Letter, each Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 7,626,514 ordinary shares, at an exercise price of $3.50 per ordinary share, in consideration of the Company's agreement to issue new warrants (the "New Warrants") to purchase up to 7,626,514 ordinary shares (the "New Warrant Shares"), at an exercise price of $4.50 per ordinary share. The Company received aggregate net proceeds of $26,690 from the exercise of the Existing Warrants by the Holders after deducting offering expenses payable by the Company, net of issuance cost in the amount of $4.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Private placements and public offerings: (Cont.)

In December 2025, 725,000 shares held in abeyance were issued to 725,000 ordinary shares. Of the 7,626,514 ordinary shares underlying the Existing Warrants, 2,828,319 shares issuable to certain Holders were held in abeyance as of December 31, 2025, due to beneficial ownership restrictions in the Existing Warrants.

The terms of the Inducement Letter were accounted for as a modification of the Existing Warrants under ASC 815-40. Because both the Existing Warrants and the New Warrants qualified for equity classification before and after the transaction, and since the purpose of the modification was to induce immediate cash exercise of the Existing Warrants and raise equity capital, the Company recognized the modification as an equity issuance. Accordingly, the impact of the modification, totaling $2,317, was recorded as an equity issuance cost. The New Warrants are exercisable for a period of two years from the date of issuance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Ordinary shares rights:

The ordinary shares confer upon their holders the right to participate in the general meetings of the Company, to vote at such meetings (each share represents one vote), and to participate in any distribution of dividends or any other distribution of the Company's property, including the distribution of surplus assets upon liquidation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Share option plan:

The Company has authorized, through its 2012 Share Option Plan, the grant of options to officers, directors, advisors, management and other key employees of up to 3,512,403 ordinary shares. The options granted generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the Company's option plan that are canceled or forfeited before expiration become available for future grant.

On May 6, 2024, the Company's board of directors approved to increase the Company's options pool by an additional 2,000,000 options from 312,403 to 2,312,403.

On May 12, 2025, the Company's board of directors approved to increase the Company's options pool by an additional 1,200,000 options from 2,312,403 to 3,512,403.

As of December 31, 2025, 568,646 of the Company's options were available for future grants.

The Black-Scholes option pricing model assumptions used to value the employee and non-employees share options at the grant dates are presented in the following table by years:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Dividend yield (%) | 0 | 0 | 0 |
| Expected volatility (%) | 103.0-104.8 | 97.1-103.0 | 92.59-95.67 |
| Risk-free interest rate (%) | 3.78-4.14 | 3.74-5.06 | 3.38-4.71 |
| Expected term (in years) | 5.85-6.1 | 0.5-6.1 | 5.3-6.1 |

---

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Share option plan: (Cont.)

These assumptions and estimates were determined as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Fair Value of Ordinary Shares - The fair value of each ordinary share was based on the closing price of
the Company's publicly traded ordinary shares as reported on the date of the grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Dividend Yield - The Company has never declared or paid any cash dividends and does not presently plan
to pay cash dividends in the foreseeable future. As a result, an expected dividend yield of zero percent was used.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Expected Volatility - As the Company has a short trading history for its ordinary shares, the expected
volatility is derived from the average historical share volatilities of several unrelated public companies within the Company's
industry that the Company considers to be comparable to its own business over a period equivalent to the option's expected term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Risk-Free Interest Rate - The risk-free rate for the expected term of the options is based on the
Black-Scholes option pricing model on the yields of United States of America Treasury securities with maturities appropriate for the expected
term of employee share option awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Expected term - The expected term represents the period that options are expected to be outstanding. For
option grants that are considered to be "plain vanilla," the Company determines the expected term using the simplified method.
The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.

 

*<u>Milestone-based options</u>*

On May 6, 2024, the board of directors granted a total of 280,000 milestone-based options to the Company's officers. The milestone condition was set as either the interim analysis outcome of early stopping of the Company's SHIELD II Phase 3 trial of D-PLEX<sub>100</sub> for efficacy or top-line results (primary endpoint) with overall alpha level of up to (and including) 5%. The average exercise price is $4.64 per share.

On July 2, 2024, the Company's shareholders approved a grant of 198,900 options and 132,600 milestone-based options to the Company's Chief Executive Officer. The exercise price for both grants was set at $4.64 per share.

On May 12, 2025, the Company's board of directors granted a total of 188,800 milestone-based options to the Company's officers. The milestone condition was set as top-line results (primary endpoint) with overall alpha level of up to (and including) 5%. The average exercise price is $2.67 per share.

On June 25, 2025, the Company's shareholders approved a grant of 120,000 options and 80,000 milestone-based options to the Company's Chief Executive Officer. The exercise price for both grants was set at $2.67 per share.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Share option plan: (Cont.)

On June 9, 2025, the Company announced positive results in the Company's SHIELD II Phase 3 trial of D-PLEX<sub>100</sub>, and as a result the milestone condition was met. As a result, the Company recognized $2,147 of share-based compensation expenses using the accelerated method during 2025.

The Black-Scholes option pricing model assumptions used to value the employee share options at the grant dates are presented in the following table for the year ended December 31, 2025:

---

| | |
|:---|:---|
| Dividend yield (%) | 0 |
| Expected volatility (%) | 95.32-95.56 |
| Risk-free interest rate (%) | 4.24-4.40 |
| Expected term (in years) | 10 |

---

 ****

A summary of the status of options to employees and non-employees under the Company's option plan as of December 31, 2025, and changes during the relevant period ended on that date is presented below:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Number of <br> options** | **Weighted**<br>**average**<br>**exercise**<br>**price** | **Aggregate<br> intrinsic<br> value** |  | **Weighted <br> average <br> remaining** <br> **contractual<br> life (years)** |
| Outstanding at beginning of year | 1814551 | $6.65 | $46 |  | 9.14 |
| &nbsp;&nbsp;&nbsp;Granted | 1205240 | 2.75 |  |  |  |
| &nbsp;&nbsp;&nbsp;Exercised | (375) | 2.67 | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | \*) |  |
| &nbsp;&nbsp;&nbsp;Forfeited | (78218) | 16.67 |  |  |  |
| &nbsp;&nbsp;&nbsp;Expired | (3390) | 6.76 |  |  |  |
| **Outstanding at end of year** | **2937808** | $**4.78** | $**1932** |  | **8.69** |
| Exercisable options at end of year | 1051550 | $6.34 | $397 |  | 8.32 |
| Vested and expected to vest | 2937808 | $4.78 | $1932 |  | 8.69 |

---

---

| | |
|:---|:---|
| \*) | Represents an amount lower than $1. |

---

The weighted average grant date fair value of options granted during the year ended December 31, 2025, 2024 and 2023 was $2.50, $3.80 and $7.66, respectively.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 10:- SHAREHOLDERS' EQUITY (CONT.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Share option plan: (Cont.)

 

*The total share-based compensation expense recognized by the Company's departments for the three years ended December 31, 2025, 2024 and 2023, was comprised as follows:*

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| Research and development | $1931 | $1539 | $1791 |
| Marketing and business development | 650 | 291 | 339 |
| General and administrative | 2273 | 994 | 1261 |
| <u>Total</u> share-based compensation expense | $4854 | $2824 | $3391 |

---

As of December 31, 2025, there were unrecognized compensation costs of $5,336, which are expected to be recognized over a weighted average period of approximately 2.51 years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Warrants:

Further to the discussion in Note 7, as of April 26, 2022, July 19, 2022 and August 1, 2024, the Company measured the fair value of the warrants to purchase ordinary shares (a Level 3 valuation) using the Black-Scholes option pricing model.

 

As of August 1, 2024, the relative fair value of the warrants to purchase ordinary shares issued to Kreos was $115, which was calculated using the following assumptions:

---

| | |
|:---|:---|
|  | **August 1,**<br>**2024** |
| Share price ($) | 3.65 |
| Exercise price ($) | 3.61 |
| Expected volatility (%) | 88 |
| Adjustment to risk-free interest rate (%) | 3.89 |
| Dividend yield (%) | 0 |
| Risk-free interest rate (%) | 3.89 |
| Expected life (in years) | 7.00 |

---

Further to the discussion in Note 10d, as of January 9, 2024, August 6, 2024 and December 26, 2024, the Company measured the fair value of the warrants to purchase ordinary shares (a Level 3 valuation) using the Black-Scholes option pricing model.

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

---

| | |
|:---|:---|
| **NOTE** 10:- | **SHAREHOLDERS' EQUITY (CONT.)** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Warrants: (Cont.)

As of January 9, 2024, August 6, 2024 and December 26, 2024, the relative fair value of the warrants to purchase ordinary shares issued was $15,248, $1,733 and $2,101, respectively, which was calculated using the following assumptions:

---

| | | | |
|:---|:---|:---|:---|
|  | **January 9,**<br>**2024** | **August 6,**<br>**2024** | **December 26,**<br>**2024** |
| Share price ($) | 6.89 | 3.50 | 2.85 |
| Exercise price ($) | 5.50 | 3.61 | 4.00 |
| Expected volatility (%) | 117.4-134 | 95-129 | 77.48 |
| Adjustment to risk-free interest rate (%) | 4.27-5.96 | 3.91-4.98 | 4.22 |
| Dividend yield (%) | - | - | **-**  |
| Risk-free interest rate (%) | 4.36-5.08 | 3.99-5.11 | 4.31 |
| Expected life (in years) | 0.68-2.00 | 0.40-2.00 | 0.5 |

---

As of December 31, 2025, all warrants are exercisable into ordinary shares, in which the outstanding issued warrants to purchase ordinary shares as of December 31, 2025, were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Grant date** | **Warrants<br> outstanding** <br>**as of** <br>**December 31,<br> 2025** | **Average<br> Exercise** <br>**price**<br>**per share ($)** | **Warrants<br> exercisable**<br>**as of** <br>**December 31, <br> 2025** | **Exercisable<br> through** |
| April 2022 | 5193 | $12.60 | 5193 | April 2029 |
| July 2022 | 1298 | $12.60 | 1298 | April 2029 |
| January 2024 | 1181191 | $5.50 | 1181191 | January 2026 \*) \*\*) |
| August 2024 | 1676588 | $3.61 | 1676588 | August 2026 \*) \*\*) |
| April 2022 | 40000 | $3.61 | 40000 | August 2031 |
| June 2025 | 7626514 | $4.50 | 7626514 | June 2027 \*) \*\*) |
|  | 10530784 |  | 10530784 |  |

---

\*) See Note 10d.

\*\*) See Note 13.

 

**POLYPID LTD. AND ITS SUBSIDIARIES** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data)**

NOTE 11:- FINANCIAL EXPENSES, NET

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| *Financial expenses:* |  |  |  |
| Financial expenses from credit line and derivative | $874 | $1510 | $1618 |
| Foreign currency transaction gains, net | 326 | - | - |
| Other financial expenses | 14 | 15 | 93 |
| &nbsp;&nbsp;&nbsp;<u>Total</u> financial expenses | 1214 | 1525 | 1711 |
| *Financial income:* |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency transaction gains, net | - | (113) | (33) |
| &nbsp;&nbsp;&nbsp;Interest income from bank deposits | (517) | (442) | (548) |
| Other financial income | (12) | (19) | - |
| Remeasurement of warrants | - | - | (201) |
| &nbsp;&nbsp;&nbsp;<u>Total</u> financial income | (529) | (574) | (782) |
| <u>Total</u> financial expense, net | $685 | $951 | $929 |

---

NOTE 12:- BASIC AND DILUTED NET LOSS PER SHARE

Basic loss per share is computed using the weighted-average number of outstanding ordinary shares during the period. Diluted loss per share is computed using the weighted-average number of outstanding ordinary shares and, when dilutive, potential ordinary shares outstanding during the period.

The potential ordinary shares that were excluded from the computation of diluted net loss per share attributable to ordinary shareholders for the periods presented because including them would have been anti-dilutive are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** |
|  | **2025** | **2024** | **2023** |
|  | **Number of ordinary shares** | **Number of ordinary shares** | **Number of ordinary shares** |
| Ordinary share options | 1051550 | 267776 | 71456 |
| Warrants | 10530784 | 13398854 | 7088 |
|  | 11582334 | 13666630 | 78544 |

---

---

| | |
|:---|:---|
| **NOTE** 13:- | **SUBSEQUENT EVENTS** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Further to the discussion in Note 10d, during January 2026, the remaining 1,181,191 January 2024 Warrants
expired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Further to the discussion in Note 10c, during January and February 2026, the Company sold 79,302 ordinary
shares under the ATM for a total amount of $364, net of issuance cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Further to the discussion in Note 10d, during January and February
2026, 103,950 warrants from the New Warrants were exercised to 103,950 ordinary shares for a total amount of $468, and 1,007,616 warrants
from the August 2024 Warrants were exercised to 716,757 ordinary shares and 290,859 pre-funded warrants with an exercise price of $0.0001
for a total amount of $3,637.

- - - - - - - - - - - - - - - - - - - -

## Exhibit 2.3

**Exhibit 2.3**

**<u>Description of Rights of Each Class of Securities</u>**

The following description of Polypid Ltd. (the "Company") share capital, provisions of our amended and restated articles of association as may be amended and restated from time to time, and Israeli law are summaries and do not purport to be complete, and is qualified in its entirety by reference to, the provisions of our amended and restated articles of association, as well as the Israeli law and any other documents referenced in the summary and from which the summary is derived.

**Type and Class of Securities**

As of December 31, 2025, the Company's authorized share capital consists of 107,800,00 ordinary shares, no par value per share ("Ordinary Shares").

**Registration Number and Purposes and Objects of the Company**

The Company's registration number with the Israeli Registrar of Companies is 51-410592-3. The Company's purpose is set forth in Section 3 of the Company's amended and restated articles of association and includes every lawful purpose.

**The Powers of the Directors**

The Company's board of directors ("Board") may exercise all powers that are not required under the Israeli Companies Law of 5759-1999 (the "Companies Law") or under the Company's amended and restated articles of association, other than the powers which are to be exercised or taken by the Company's shareholders.

**Preemptive Rights**

The Company's Ordinary Shares are not redeemable and are not subject to any preemptive right.

 ****

**Conflict of Interests**

Subject to the provisions of the Companies Law and the Company's amended and restated articles of association, no director shall be disqualified by virtue of his or her office from holding any office or place of profit in the Company or in any company in which the Company shall be a shareholder or otherwise interested, or from contracting with the Company as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company in which any director shall be in any way interested, be avoided, nor, other than as required under the Companies Law, shall any director be liable to account to the Company for any profit arising from any such office or place of profit or realized by any such contract or arrangement by reason only of such director's holding that office or of the fiduciary relations thereby established, but the nature of his or her interest, as well as any material fact or document, must be disclosed by him at the meeting of the Board at which the contract or arrangement is first considered, if his or her interest then exists, or, in any other case, at no later than the first meeting of the Board after the acquisition of his or her interest.

**Limitations or Qualifications**

 ****

Not applicable.

 **

**Other Rights**

 **

Not applicable.

 ****

 ****

**Rights of the Shares**

The Company's Ordinary Shares shall confer upon the holders thereof:

● equal right to attend and to vote at all of the Company's general meetings, whether regular or special, with each Ordinary Share entitling the holder thereof, which attends the meeting and participates in the voting, either in person or by a proxy or by a written ballot, to one vote;

● equal right to participate in distribution of dividends, if any, whether payable in cash or in bonus shares, in distribution of assets or in any other distribution, on a per share pro rata basis; and

● equal right to participate, upon the Company's dissolution, in the distribution of the Company's assets legally available for distribution, on a per share pro rata basis.

**Election of Directors**

Pursuant to the Company's amended and restated articles of association, the Company's directors are elected solely at an annual general meeting of the Company's shareholders and serve on the Board until the next annual general meeting of the Company's shareholders following his or her appointment, or until they cease to act as Board members pursuant to the provisions of the Company's amended and restated articles of association or any applicable law. The Board may at any time and from time to time appoint any person as a director to fill a vacancy (whether such vacancy is due to a director no longer serving or due to the number of directors serving being less than the maximum number of eleven, as stated in the Company's amended and restated articles of association). In the event of one or more such vacancies in the Board, the continuing directors may continue to act in every matter, provided, however, that if they number less than the minimum number of five, as provided in the Company's amended and restated articles of association, they may only act in an emergency or to fill the office of director which has become vacant up to a number equal to the minimum number of five. The office of a director that was appointed by the Board to fill any vacancy shall only be for the remaining period of time during which the director whose service has ended was filled would have held office, or in case of a vacancy due to the number of directors serving being less than the maximum number of eleven. The Company is not currently required to have external directors serving as Board members, based on an exemption that the Company has elected to be governed by under the Companies Law regulations.

**Annual and Special Meetings**

Under the Companies Law, the Company is required to hold an annual general meeting of the Company's shareholders once every calendar year, at such time and place which shall be determined by the Board, which must be no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special general meetings.

Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the Board, that will be in any event not more than the maximum period and not less than the minimum period permitted by the Companies Law. Resolutions regarding the following matters must be passed at a general meeting of the Company's shareholders:

● amendments to the Company's amended and restated articles of association;

● the exercise of the Board's powers by a general meeting if the Board's is unable to exercise its powers and the exercise of any of its powers is required for the Company's proper management;

● appointment or termination of the Company's auditors;

● appointment of directors (other than in the cases specified in the Company's amended and restated articles of association);

● approval of acts and transactions requiring general meeting approval pursuant to the provisions of the Companies Law and any other applicable law;

● increases or reductions of the Company's authorized share capital; and

● a merger (as such term is defined in the Companies Law).

***Notices***

The Companies Law require that a notice of any annual or special shareholders meeting be provided at least 14 or 21 days prior to the meeting, depending on the matters to be voted upon, and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, approval of the company's general manager to serve as the chairman of the board of directors or an approval of a merger, notice must be provided at least 35 days prior to the meeting.

***Quorum***

As permitted under the Companies Law and our amended and restated articles of association, the quorum required for the Company's general meetings consists of at least two shareholders present in person, by proxy, written ballot or voting by means of electronic voting system, who hold or represent between them in the aggregate at least twenty five percent (25%) of the voting power of the Company. If within half an hour of the time set forth for the general meeting a quorum is not present, the general meeting shall stand adjourned either (i) to the same day of the following week, at the same hour and in the same place (ii) to such other date, time and place as prescribed in the notice to the shareholders and in such adjourned meeting or (iii) to such day and at such time and place as the chairperson of the general meeting shall determine (which may be earlier or later than the date pursuant to clause (i) above). If no quorum is present within half an hour of the time arranged, the meeting shall be adjourned and at the adjourned meeting, any number of shareholders participating in the meeting, shall constitute a quorum.

***Access to Corporate Records***

 ****

Under the Companies Law, shareholders are provided access to: minutes of the Company's general meetings; the Company's shareholders register and principal shareholders register, articles of association and annual audited financial statements; and any document that the Company is required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. These documents are publicly available and may be found and inspected at the Israeli Registrar of Companies. 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. The Company may deny this request if the Company believes it has not been made in good faith or if such denial is necessary to protect the Company's interest or protect a trade secret or patent.

***Adoption of Resolutions***

Except as required by the Companies Law or the Company's amended and restated articles of association, a resolution of the shareholders shall be adopted if approved by the holders of a simple majority of the voting power represented at the general meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting. Without limiting the generality of the foregoing, a resolution with respect to a matter or action for which the Companies Law prescribes a higher majority or pursuant to which a provision requiring a higher majority would have been deemed to have been incorporated into the Company's amended and restated articles of association, but resolutions with respect to which the Companies Law allows the Company's amended and restated articles of association to provide otherwise, shall be adopted by a simple majority of the voting power represented at the General Meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting.

 ****

**Changing Rights Attached to Shares**

If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class, unless otherwise provided by the Companies Law or the Company's amended and restated articles of association, may be modified or cancelled by the Company by a resolution of the general meeting of the holders of all shares as one class, without any required separate resolution of any class of shares.

The increase in the authorized share capital, the creation of a new class or shares, the increase in the authorized share 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.

 ****

**Limitations on the Rights to Own Ordinary Shares**

There are no limitations on the right to own the Company's securities*.*

**Provisions Restricting Change in Control of the Company**

 ****

There are no specific provisions of the Company's amended and restated articles of association that would have an effect of delaying, deferring or preventing a change in control of the Company or that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or the Company's subsidiaries). However, as described below, certain provisions of the Companies Law may have such effect.

The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to the merger have the transaction approved by its board of directors and, unless certain requirements described under the Companies Law are met, a vote of the majority of its shareholders, and, in the case of the target company, also a majority vote of each class of its shares. For purposes of the shareholder vote of each party, unless a court rules otherwise, the merger will not be deemed approved if shares representing a majority of the voting power present at the shareholders meeting and which are not held by the other party to the merger (or by any person or group of persons acting in concert who holds 25% or more of the voting power or the right to appoint 25% or more of the directors of the other party) vote against the merger. If, however, the merger involves a merger with a company's own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same Special Majority (as defined below) approval that governs all extraordinary transactions with controlling shareholders. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors. In addition, a merger may not be completed unless at least (1) 50 days have passed from the time that the requisite proposals for approval of the merger were filed with the Israeli Registrar of Companies by each merging company and (2) 30 days have passed since the merger was approved by the shareholders of each merging company.

The term "Special Majority" is defined in the Companies Law as:

● at least a majority of the shares held by shareholders who are not controlling shareholders and do not have personal interest in the merger (excluding a personal interest that did not result from the shareholder's relationship with the controlling shareholder) have voted in favor of the proposal (shares held by abstaining shareholders shall not be considered); or

● the total number of shares voted against the merger, does not exceed 2% of the aggregate voting rights of the company.

The Companies Law also provides that an acquisition of shares in an Israeli public company must be made by means of a "special" tender offer if as a result of the acquisition (1) the purchaser would become a holder of 25% or more of the voting rights in the company, unless there is already another holder of at least 25% or more of the voting rights in the company, or (2) the purchaser would become a holder of 45% or more of the voting rights in the company, unless there is already a holder of more than 45% of the voting rights in the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received shareholders' approval, subject to certain conditions, (2) was from a holder of 25% or more of the voting rights in the company which resulted in the acquirer becoming a holder of 25% or more of the voting rights in the company, or (3) was from a holder of more than 45% of the voting rights in the company which resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company. A "special" tender offer must be extended to all shareholders. In general, a "special" tender offer may be consummated only if (1) at least 5% of the voting power attached to the company's outstanding shares will be acquired by the offeror and (2) the offer is accepted by a majority of the offerees who notified the company of their position in connection with such offer (excluding the offeror, controlling shareholders, holders of 25% or more of the voting rights in the company or anyone on their behalf, or any person having a personal interest in the acceptance of the tender offer). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

In accordance with the regulations promulged under the Companies Law relating to Israeli companies whose shares are listed on foreign stock exchanges, the aforesaid limitations regarding a special tender offer do not apply to such companies, provided that the law as applicable to companies incorporated in the country in which the foreign company is listed for trade provides a restriction on the acquisition of control of any proportion of a company or that the acquisition of control of any proportion requires the purchaser to also offer a purchase offer to shareholders from among the public.

If, as a result of an acquisition of shares, the acquirer will hold more than 90% of an Israeli public company's outstanding shares, the acquisition must be made by means of a tender offer for all of the outstanding shares. In general, if less than 5% of the outstanding shares are not tendered in the tender offer and more than half of the offerees who have no personal interest in the offer tendered their shares, all the shares that the acquirer offered to purchase will be transferred to it by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares. Shareholders may request appraisal rights in connection with a full tender offer for a period of six months following the consummation of the tender offer, but the acquirer is entitled to stipulate, under certain conditions, that tendering shareholders will forfeit such appraisal rights.

**Differences Between Law of Different Jurisdictions**

 ****

Not applicable.

**Borrowing Powers** 

Pursuant to the Companies Law and the Company's amended and restated articles of association, the Board may exercise all powers and take all actions that are not required under law or under the Company's amended and restated articles to be exercised or taken by the shareholders, including the power to borrow money for company purposes.

**Changes in the Company's Capital**

The general meeting may, by a simple majority vote of the shareholders attending the general meeting and subject to the provisions of the Companies Law:

● increase the Company's authorized share capital by the creation of new shares from the existing class or a new class, as determined by the general meeting;

● cancel any authorized share capital which has not been taken or agreed to be taken by any person;

● consolidate and divide all or any of the Company's share capital into shares of larger nominal value than the Company's existing shares;

● subdivide the Company's existing shares or any of them, the Company's share capital or any of it, into shares of smaller nominal value than is fixed; and

● reduce the Company'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.

**Debt Securities**

The Company does not have any debt securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.

**Warrants and Rights**

The Company does not have any warrants or rights that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.

**Other Securities**

The Company does not have any other securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended.

## Exhibit 11.1

**Exhibit 11.1**

**PolyPid Ltd.**

**Insider Trading Policy**

**Effective February 9, 2026**

**I.**  **<u>Introduction</u>** 

This policy determines acceptable transactions in the securities of PolyPid Ltd. (the "***Company***") by our employees, directors, consultants and other related persons. During the course of your employment, directorship or consultancy with the Company, you may receive important information that is not yet publicly available ("***inside information***"), about the Company or about other publicly-traded companies with which the Company has business dealings. Because of your access to this inside information, you may be in a position to profit financially by buying or selling, or in some other way dealing, in the Company's stock, or stock of another publicly-traded company, or to disclose such information to a third party who does so profit (a "***tippee***").

**II.**  **<u>Insider Trading Policy</u>** 

A. *Securities Transactions* 

Use of inside information by someone for personal gain, or to pass on, or "tip," the inside information to someone who uses it for personal gain, is illegal, regardless of the quantity of shares, and is therefore prohibited. You can be held liable both for your own transactions and for transactions effected by a tippee, or even a tippee of a tippee. Furthermore, it is important that the appearance of insider trading in securities be avoided. The only exception is that transactions directly with the Company, *e.g.,* option exercises for cash or purchases under an employee stock purchase plan, are permitted. However, the subsequent sale (including the sale of shares in a cashless exercise program) or other disposition of such stock is fully subject to these restrictions.

B. *Inside Information* 

As a practical matter, it is sometimes difficult to determine whether you possess inside information. The key to determining whether nonpublic information you possess about a public company is inside information is whether dissemination of the information would likely affect the market price of the company's stock or would likely be considered important, or "material," by investors who are considering trading in that company's stock. Certainly, if the information makes you want to engage in transactions, it would probably have the same effect on others. Remember, both positive and negative information can be material. If you possess inside information, you may not engage in transactions in a company's stock, advise anyone else to do so or communicate the information to anyone else until you know that the information has been publicly disseminated. This means that in some circumstances, you may have to forego a proposed transaction in a company's securities, including any offer to purchase or offer to sell or gift or any other disposition of the company's securities, even if you planned to execute the transaction prior to learning of the inside information and even though you believe you may suffer an economic loss or sacrifice an anticipated profit by waiting. "***Trading***" includes engaging in short sales, transactions in put or call options, hedging transactions and other inherently speculative transactions.

Although by no means an all-inclusive list, information about the following items may be considered to be inside information until it is publicly disseminated:

● financial results or forecasts;

● confirming or updating previous disclosures or analysts' reports;

● major product or technological developments;

● results of pre-clinical studies and clinical trials of the Company's product candidates;

● major contract awards or cancellations;

● M&A activity, including acquisitions or dispositions of assets or divisions;

● pending public or private sales of debt or equity securities;

● declaration of stock splits, dividends or changes in dividend policy;

● top management or control changes;

● possible tender offers or proxy fights;

● significant write-offs;

● significant litigation or settlements;

● impending bankruptcy;

● gain or loss of a significant license agreement or other contracts with customers or suppliers;

● pricing changes or discount policies;

● cybersecurity risks and incidents;

● corporate partner relationships or joint venture developments; and

● governmental actions or regulations.

For information to be considered publicly disseminated, it must be widely disclosed through a press release or SEC filing, and a sufficient amount of time must have passed to allow the information to be fully disclosed. Generally speaking, information will be considered publicly disseminated after two full trading days have elapsed since the date of public disclosure of the information. For example, if an announcement of inside information of which you were aware was made *prior* to trading on Wednesday, then you may execute a transaction in the Company's securities on Friday.

**III.**  **<u>Stock Trading by Directors, Officers and Other Employees</u>** 

We require directors, officers and other employees to do more than refrain from insider trading. We require that they limit their transactions in the Company's stock to defined time periods following public dissemination of quarterly, interim and annual financial results and notify, and receive approval from, the Chief Compliance Officer prior to engaging in transactions in the Company's stock and observe other restrictions designed to minimize the risk of apparent or actual insider trading.

 

*A.* *Covered Insiders* 

The provisions outlined in this stock trading policy apply to all directors, officers and employees of the Company. Generally, any entities or family members of those individuals whose trading activities are controlled or influenced by any of such persons should be considered to be subject to the same restrictions.

In addition, the Company itself must comply with securities laws applicable to its own securities trading activities, and must not engage in any transaction involving a purchase or sale of its securities, including any offer to purchase or offer to sell or other disposition of its securities, when it is in possession of material nonpublic information concerning the Company, other than in compliance with applicable law, subject to the policies and procedures adopted by the Company and the exceptions listed in Section III.C of this policy to the extent applicable.

 

*B.* *Window Period* 

 

**Generally, except as set forth in this paragraph B and in paragraphs C, D and G of this policy, directors, officers and other employees may buy or sell securities of the Company only during a "*window period*" that opens after two full trading days have elapsed after the public dissemination of the Company's annual, interim or quarterly financial results and closes on the last trading day two weeks before the end of the quarter.** This window period may be closed early or may not open if, in the judgment of the Company's Chief Compliance Officer, there exists undisclosed information that would make transactions by the Company's directors, officers or employees inappropriate. It is important to note that the fact that the window period has closed early or has not opened should be considered inside information. A director, officer or other employee who believes that special circumstances require him or her to execute transaction outside the window period should consult with the Company's Chief Compliance Officer. Permission to execute transactions outside the window period will be granted only where the circumstances are extenuating and there appears to be no significant risk that the transaction may subsequently be questioned.

 

*C.* *Exceptions to Window Period* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Option/Warrant Exercises*. Directors, officers and other employees may exercise options/warrants for cash granted under the Company's equity incentive plans without restriction to any particular period in light of information then available to the public. However, the subsequent sale of the stock (including sales of stock in a cashless exercise) acquired upon the exercise of options/warrants is subject to all provisions of this policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *10b5-1 Automatic Trading Programs*. The restrictions set forth in this policy shall not apply to sales made pursuant to a Qualified Plan. For purposes of this exception, a "Qualified Plan" is a written plan for selling the Company's securities which meets each of the following requirements: (a) the plan is adopted by the insider during a trading window and when the insider is not in possession of material non-public information; (b) the plan is adhered to strictly by the insider; (c) the plan either (i) specifies the amount of securities to be sold and the date on which the securities are to be sold, (ii) includes a written formula or algorithm, or computer program, for determining the amount of securities to be sold and the price at which and the date on which the securities are to be purchased or sold, or (iii) does not permit the insider to exercise any subsequent influence over how, when, or whether to effect sales; provided, in addition, that any other person who, pursuant to the plan, does exercise such influence must not have been aware of the material non-public information when doing so; (d) the plan includes a representation from the insider adopting the plan that such insider (i) is not aware of any material nonpublic information about the Company or its securities and (ii) is adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Securities Exchange Act of 1934, as amended (the "***Exchange Act***"); (e) the plan provides that trading under the plan cannot begin until the later of (i) 90 days after the adoption of the plan or (ii) two business days following the disclosure of the Company's financial results in a Form 6-K or Form 20-F (such period being referred to as the "cooling-off period", but, in either case, not to exceed 120 days following the adoption of the plan, and provided that if the insider is not a director or officer of the Company, such cooling-off period shall be at least 30 days rather than the longer periods set forth above); and (e) at the time it is adopted the plan conforms to all other requirements of Rule 10b5-1 under the Exchange Act as then in effect. Rule 10b5-1 provides an affirmative defense from insider trading liability under the U.S. federal securities laws for trading plans that meet the above requirements.

In accordance with Rule 10b5-1 under the Exchange Act, any change to the amount, price, or timing of the purchase or sale of securities underlying a Qualified Plan constitutes termination of the Qualified Plan and the adoption of a new Qualified Plan, which triggers the cooling-off period described above. No insider may have more than one Qualified Plan for purchases or sales of securities on the open market during the same period. In addition, no insider may have more than one single-trade Qualified Plan during any 12-month period. A single-trade plan is one that has the practical effect of requiring the purchase or sale of securities as a single transaction. With respect to overlapping Qualified Plans, an insider may have two separate plans provided (i) the later-commencing plan does not begin until all trades have been completed under the first plan or the first plan expires without execution, and trading during the cooling-off period that would have applied if the later-commencing plan was adopted on the date the earlier-commencing plan terminates and (ii) the separate plans satisfy all other conditions applicable to Qualified Plans. With respect to overlapping Qualified Plans, an insider may have separate plans for "sell-to-cover" transactions in which an insider instructs an agent to sell securities in order to satisfy tax withholding obligations at the time an equity award vests. Any such additional plan must only authorize qualified "sell-to-cover" transactions. With respect to single-trade Qualified Plans, an insider may have a single-trade plan for "sell-to-cover" transactions.

*D.* *Pre-Clearance and Advance Notice of Transactions* 

In addition to the requirements of paragraph B above, directors, officers and other employees that the Clearing Officer (as defined below) deems to have routine access to material non-public information may not engage in any transaction in the Company's securities, including any offer to purchase or offer to sell or gift or any other disposition of the Company's securities, loan or other transfer of beneficial ownership and regarding compliance with the provisions of Section 16(a) of the Exchange Act ("Section 16"), which effective March 18, 2026, require the Company's directors and officers (as defined in Section 16) to make public electronic filings with the U.S. Securities and Exchange Commission reporting their beneficial ownership and to disclose their transactions in the Company's securities, without first obtaining pre-clearance of the transaction from the Company's Chief Financial Officer (the "***Clearing Officer***"), at least two business days in advance of the proposed transaction. The Clearing Officer will then determine whether the transaction may proceed. Pre-cleared transactions not completed within five business days shall require new pre-clearance under the provisions of this paragraph. The Company may, at its discretion, shorten such period of time.

Advance notice of gifts or an intent to exercise an outstanding stock option shall be given to the Clearing Officer. To the extent possible, advance notice of upcoming transactions to be effected pursuant to an established Trading Plan under Section III.C.2 above shall also be given to the Clearing Officer.

 

*E.* *Prohibition of Speculative or Short-term Trading* 

No director, officer or other employee may engage in short sales, transactions in put or call options, hedging transactions, margin accounts or other inherently speculative transactions with respect to the Company's stock at any time.

 

*F.* *Control Stock* 

Directors and officers should take care not to violate the restrictions on sales by control persons (Rule 144 under the U.S. Securities Act of 1933, as amended), and should file any notices of sale required by Rule 144.

Directors and officers (as defined in Section 16) of the Company must also comply with the provisions of Section 16, which effective March 18, 2026, requires the Company's directors and officers to report transactions in the Company's securities through filing of Form 3, Form 4 and Form 5 with the U.S. Securities and Exchange Commission. It is the responsibility of each director and officer to comply with their Section 16 reporting obligations.

**IV.**  **<u>Duration of Policy's Applicability</u>** 

This policy continues to apply to your transactions in the Company's shares or the securities of other publicly traded companies engaged in business transactions with the Company even after your employment, directorship or consultancy with the Company has terminated. If you are in possession of inside information when your relationship with the Company concludes, you may not execute transactions in the Company's shares or the securities of any such other company until the information has been publicly disseminated or is no longer material.

**V.**  **<u>Penalties</u>** 

Anyone who effects transactions in the Company's stock or the stock of other public companies engaged in business transactions with the Company (or provides information to enable others to do so) on the basis of inside information is subject to both civil liability and criminal penalties, as well as disciplinary action by the Company. An employee, director or consultant who has questions about this policy should contact his or her own attorney or our Compliance Officer, Dikla Czaczkes Akselbrad at dikla.c@polypid.com.

\* \* \*

Adopted/last amended:

________________________________________________________________________________________________

I, the undersigned, _________________, hereby confirm that I read the foregoing and I agree to act according to the terms of the Policy.

Sign:   <br> Date:

## Exhibit 12.1

**Exhibit 12.1**

**CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)**

I, Dikla Czaczkes Akselbrad, certify that:

1. I have reviewed this annual report on Form 20–F of PolyPid Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c) Evaluated the effectiveness of the company's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the company's
internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the company's internal control over financial reporting.

5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's
ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the company's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 25, 2026 | /s/ Dikla Czaczkes Akselbrad |
|  | Dikla Czaczkes Akselbrad |
|  | Chief Executive Officer |

---

## Exhibit 12.2

**Exhibit 12.2**

**CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)**

I, Jonny Missulawin, certify that:

1. I have reviewed this annual report on Form 20–F of PolyPid Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5. The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: February 25, 2026 | /s/ Jonny Missulawin |
|  | Jonny Missulawin |
|  | Chief Financial Officer |

---

## Exhibit 13.1

**Exhibit 13.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. Section 1350**

In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2025 (the "Report") by PolyPid Ltd. (the "Company"), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: February 25, 2026 | /s/ Dikla Czaczkes Akselbrad |
|  | Dikla Czaczkes Akselbrad |
|  | Chief Executive Officer |

---

## Exhibit 13.2

**Exhibit 13.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. Section 1350**

In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2025 (the "Report") by PolyPid Ltd. (the "Company"), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: February 25, 2026 | /s/ Jonny Missulawin |
|  | Jonny Missulawin |
|  | Chief Financial Officer |

---

## Exhibit 15.1

**Exhibit 15.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the following Registration Statements:

&nbsp;&nbsp;&nbsp;&nbsp;(1) Registration Statements (Form F-3 Nos. 333-276826, 333-280658, 333-281863,333-284376 and 333-289034) of
PolyPid Ltd.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Registration Statements (Form S-8 Nos. 333-239517, 333-271060, 333-277703, 333-280662 and 333-289570)
pertaining to the Amended and Restated 2012 Share Option plan of PolyPid Ltd.

of our report dated February 25, 2026, with respect to the consolidated financial statements of PolyPid Ltd. included in this Annual Report (Form 20-F) of PolyPid Ltd. for the year ended December 31, 2025.

---

| | |
|:---|:---|
| Haifa, Israel | /s/ Kost Forer Gabbay & Kasierer |
| February 25, 2026 | A Member of EY Global |

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