# EDGAR Filing Document

**Accession Number:** 0001611747
**File Stem:** 0001213900-26-038011
**Filing Date:** 2026-4
**Character Count:** 973546
**Document Hash:** 5b7c273a1c27b654dd72e0146be11e5f
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-038011.hdr.sgml**: 20260401

**ACCESSION NUMBER**: 0001213900-26-038011

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 102

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260401

**DATE AS OF CHANGE**: 20260401

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Scinai Immunotherapeutics Ltd.
- **CENTRAL INDEX KEY:** 0001611747
- **STANDARD INDUSTRIAL CLASSIFICATION:** BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 000000000
- **STATE OF INCORPORATION:** L3
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-37353
- **FILM NUMBER:** 26824712

**BUSINESS ADDRESS:**
- **STREET 1:** JERUSALEM BIOPARK, 2ND FLOOR
- **STREET 2:** HADASSAH EIN KEREM CAMPUS
- **CITY:** JERUSALEM
- **STATE:** L3
- **ZIP:** 00000
- **BUSINESS PHONE:** 972-8-9302529

**MAIL ADDRESS:**
- **STREET 1:** JERUSALEM BIOPARK, 2ND FLOOR
- **STREET 2:** HADASSAH EIN KEREM CAMPUS
- **CITY:** JERUSALEM
- **STATE:** L3
- **ZIP:** 00000

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** BiondVax Pharmaceuticals Ltd.
- **DATE OF NAME CHANGE:** 20140624

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

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 20-F**

(Mark One)

**☐** **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**

For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**OR**

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

Date of event requiring this shell company report:

For the transition period from ____________ to ____________

**Commission file No. 001-37353**

**Scinai Immunotherapeutics Ltd.**

(Exact name of Registrant as specified in its charter)

**N/A**

(Translation of Registrant's name into English)

**ISRAEL**

(Jurisdiction of incorporation or organization)

**Jerusalem BioPark, 2nd floor**

**Hadassah Ein Kerem Campus**

**Jerusalem, Israel**

**(+972) 8-930-2529 (+972) 8-930-2531 (facsimile)**

(Address of principal executive offices)

**Amir Reichman, Chief Executive Officer**

**(+972) 8-930-2529 (+972) 8-930-2531 (facsimile)**

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

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

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| **American Depositary Shares, each representing 4,000 ordinary share, no par value** | **SCNI** | **Nasdaq Capital Market** |
| **Ordinary Shares, no par value\*** |  |  |

---

\* Not for trading on The Nasdaq Capital Market, but listed above only in connection with the registration of American Depositary Shares.

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

<u>None</u>

(Title of Class)

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

<u>None</u>

(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 13,872,899,584 ordinary shares, no par value.

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

Yes ☒ No ☐

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

Yes ☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐ <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. ☐

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. N/A

Item 17 ☐ Item 18 ☐

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

Yes ☐ No ☒

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| [Introduction](#a_001) | [Introduction](#a_001) | ii |
| [Note Regarding Forward-Looking Statements](#a_002) | [Note Regarding Forward-Looking Statements](#a_002) | iii |
| [PART I](#a_003) | [PART I](#a_003) |  |
| Item 1. | [Identity of Directors, Senior Management and Advisers](#a_004) | 1 |
| Item 2. | [Offer Statistics and Expected Timetable](#a_005) | 1 |
| Item 3. | [Key Information](#a_006) | 1 |
| Item 4. | [Information on the Company](#a_007) | 38 |
| Item 4A. | [Unresolved Staff Comments](#a_008) | 61 |
| Item 5. | [Operating and Financial Review and Prospects](#a_009) | 61 |
| Item 6. | [Directors, Senior Management and Employees](#a_010) | 70 |
| Item 7. | [Major Shareholders and Related Party Transactions](#a_011) | 89 |
| Item 8. | [Financial Information](#a_012) | 92 |
| Item 9. | [The Offer and Listing](#a_013) | 93 |
| Item 10. | [Additional Information](#a_014) | 93 |
| Item 11. | [Quantitative and Qualitative Disclosures About Market Risk](#a_015) | 108 |
| Item 12. | [Description of Securities Other than Equity Securities](#a_016) | 108 |
| [PART II](#a_017) | [PART II](#a_017) |  |
| Item 13. | [Defaults, Dividend Arrearages and Delinquencies](#a_018) | 110 |
| Item 14. | [Material Modifications to the Rights of Security Holders and Use of Proceeds](#a_019) | 110 |
| Item 15. | [Controls and Procedures](#a_020) | 110 |
| Item 16. | [\[Reserved\]](#a_021) | 111 |
| Item 16A. | [Audit Committee Financial Expert](#a_022) | 111 |
| Item 16B. | [Code of Ethics](#a_037) | 111 |
| Item 16C. | [Principal Accountant Fees and Services](#a_023) | 111 |
| Item 16D. | [Exemptions from the Listing Standards for Audit Committees](#a_024) | 112 |
| Item 16E. | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](#a_025) | 112 |
| Item 16F. | [Change in Registrant's Certifying Accountant](#a_026) | 112 |
| Item 16G. | [Corporate Governance](#a_027) | 112 |
| Item 16H. | [Mine Safety Disclosure](#a_028) | 114 |
| Item 16I. | [Disclosure Regarding Foreign Jurisdictions that prevent Inspection](#a_029) | 114 |
| Item 16J. | [Insider Trading Policies](#a_030) | 114 |
| Item 16K. | [Cybersecurity](#a_031) | 114 |
| [PART III](#a_032) | [PART III](#a_032) |  |
| Item 17. | [Financial Statements](#a_033) | 116 |
| Item 18. | [Financial Statements](#a_034) | 116 |
| Item 19. | [Exhibits](#a_035) | 116 |
| [Signatures](#a_036) | [Signatures](#a_036) | 118 |
| [Index to Consolidated Financial Statements](#a_038) | [Index to Consolidated Financial Statements](#a_038) | F-1 |

---

i

**INTRODUCTION**

**Certain Definitions:**

In this annual report, unless the context otherwise requires:

● references to "Scinai," the "Company," "us," "we" and "our" refer to Scinai Immunotherapeutics Ltd. (the "Registrant"), an Israeli company;

● references to "ordinary shares," "our shares" and similar expressions refer to the Registrant's ordinary shares, no par value;

● references to "ADS" refer to the Registrant's American Depositary Shares

● references to "Company product candidate(s)" refer to any future, newly licensed or acquired product candidate(s);

● references to "CDMO business unit" refer to the Registrant's contract development and manufacturing services business unit.

● references to "R&D business unit" refer to the Registrant's research and development business unit focused on in-house development of inflammation and immunology (I&I) biological therapeutic products beginning with an innovative, de-risked, pipeline of nanosized VHH antibodies (NanoAbs) targeting diseases with large unmet medical needs.

● references to "dollars," "U.S. dollars" and "$" are to United States Dollars;

● references to "shekels" and "NIS" are to New Israeli Shekels, the Israeli currency;

● references to the "Companies Law" are to Israel's Companies Law, 5759-1999, as amended; and

● references to the "SEC" are to the United States Securities and Exchange Commission.

**Trademarks and Tradenames**

Solely for convenience, the trademarks, service marks and trade names referred to or incorporated by reference herein are without the <sup>®</sup> and™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This annual report contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing herein are, to our knowledge, the property of their respective owners. Nanobody is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. Scinai has no affiliation with and is not endorsed by Sanofi. We do not intend our use or display of other companies' trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

**Note Regarding Ratio Change of ADSs to Non-Traded Ordinary Shares**

Effective May 21, 2024, we effected a ratio change of the American Depositary Shares (ADSs) to our ordinary shares from the previous ratio of one (1) ADS representing four hundred (400) non-traded ordinary shares to a new ratio of one (1) ADS representing four thousand (4,000) ordinary shares. Each such ratio change had the same effect as a one-for-ten reverse ADS split. Unless otherwise indicated, ADSs and per ADS amounts in this Annual Report have been retroactively adjusted to reflect the changes in ratio for all periods presented.

ii

**Note Regarding Forward-Looking Statements**

Some of the statements under the sections entitled "Item 3. Key Information – Risk Factors," "Item 4. Information on the Company," and "Item 5. Operating and Financial Review and Prospects" and elsewhere in this Annual Report on Form 20-F constitute forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "potential," or the negative of these terms or other similar expressions, but these are not the only ways these statements are identified. Forward-looking statements are based on information we have when those statements are made or our management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

Some of the factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements contained herein, include but are not limited to:

● our history of operating losses, our lack of current profitability and our ability to achieve and sustain profitability, including our ability to generate sufficient revenues from our CDMO activities to support our operations;

● our need to obtain additional financing to fund our operations and development programs, the timing and availability of such financing, and the potential dilution to our existing shareholders or restrictions imposed by debt financing;

● our ability to maintain compliance with the continued listing requirements of Nasdaq;

● the success of our business strategy, including our ability to develop and grow our CDMO business while advancing our therapeutic development programs;

● our ability to generate demand for our CDMO services, to attract and retain customers, to enter into and execute contracts on commercially acceptable terms, and to deliver such services in accordance with required quality standards and timelines;

● risks associated with the integration, operation and scaling of our CDMO activities, including the integration of transferred or acquired operations;

● our dependence on third parties and collaborators for the development, commercialization and marketing of our product candidates, and our ability to enter into and maintain such relationships;

● our ability to discover, develop and commercialize current and future product candidates, which are at an early stage of development and do not generate revenue;

● the timing, cost, design and success of clinical trials, including the risk that results from earlier studies may not be predictive of future results, and that trials may be delayed, suspended or terminated;

● risks related to our NanoAbs technology and platform, including scientific, regulatory and manufacturing challenges;

● our ability to maintain, protect and enforce our intellectual property rights, including our licensed rights from MPG and UMG, and to comply with the terms of such licenses;

● competition in both our therapeutic development activities and our CDMO business;

● our ability to successfully integrate and operate acquired or transferred activities, including the former Recipharm operations;

● risks related to our operations in Israel, including geopolitical and security conditions; and

the risk of disruptions to our manufacturing facilities or operations, which could adversely affect our ability to develop product candidates or deliver CDMO services.

iii

**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**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **RESERVED.** 

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Capitalization and Indebtedness** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Reasons for the Offer and Use of Proceeds** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Risk Factors** 

 

*An investment in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the factors described below, together with all other information included in this annual report, including our financial statements and the related notes included elsewhere in this annual report. Our business includes both therapeutic development activities and a contract development and manufacturing organization (CDMO) business, each of which is subject to distinct risks and uncertainties. We may face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. If any of these risks occur, our business, financial condition, results of operations and business prospects could be materially and adversely affected. In that event, the trading price of the ADSs could decline and you could lose all or part of your investment.*

**Summary of Risk Factors** 

The following is a summary of some of the principal risks we face. The list below is not exhaustive, and investors should read this "Risk factors" section in full.

● We have a going concern qualification and will require substantial additional financing to fund our operations and development programs. If we are unable to obtain additional capital when needed, we may be required to delay, limit, reduce or terminate our activities, or cease operations. Any such financing may also result in significant dilution to our existing shareholders or impose restrictive covenants.

● We have a history of operating losses and are not currently profitable. Although we generate revenues from our CDMO activities, we may continue to incur losses and may not achieve profitability in the near future, or at all.

● Our failure to meet the continued listing requirements of Nasdaq could result in the delisting of our ADSs, which could adversely affect the market liquidity and price of our shares.

● Our business strategy, including the development and growth of our CDMO business alongside our therapeutic pipeline, may not be successful.

● Our CDMO business is dependent on market demand for our services and our ability to attract and retain customers, enter into contracts on commercially acceptable terms, and deliver high-quality services on time. Failure to do so could adversely affect our revenues and prospects.

● Our CDMO operations are complex and subject to strict regulatory and quality requirements, and any failure to meet such requirements could harm our reputation and business.

● We are dependent on third parties and collaborators to develop, commercialize and market our product candidates, and we may be unsuccessful in entering into or maintaining such relationships.

● Our product candidates are at an early stage of development and do not generate revenue, and we may not be successful in discovering, developing or commercializing any product candidates.

● Clinical trials are expensive, time-consuming and uncertain, and delays or failures in clinical development could adversely affect our business.

● Results from earlier preclinical or clinical studies may not be predictive of future results.

● We face significant competition in both our therapeutic development activities and our CDMO business.

● Our NanoAbs programs depend on licenses from third parties, including MPG and UMG, and we could lose our rights under such licenses if we fail to comply with their terms.

● Our ability to operate our business depends on the continued operation of our manufacturing facilities, and disruptions to our facilities in Jerusalem or Yavne could adversely affect our operations.

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

 ****

***We have a going concern qualification and will require substantial additional financing to fund our operations and development programs. If we are unable to obtain additional capital when needed, we may be required to delay, limit, reduce or terminate our activities, or cease operations. Any such financing may also result in significant dilution to our existing shareholders or impose restrictive covenants.***

Our financial statements include a going concern qualification, and we will need to raise significant additional capital to finance our operations. If we are unable to do so, we may be required to significantly reduce or cease our operations.

As of December 31, 2025, December 31, 2024 and December 31, 2023, our cash and cash equivalents totaled $1.6 million, $1.9 million and $.9 million, respectively. For the years then ended, we incurred operating losses of $7.5 million, $8.6 million and $9.7 million, respectively, and had negative cash flows from operating activities of $6.0 million, $6.3 million and $9.3 million, respectively. Our current cash position is not sufficient to fund our planned operations for at least one year from the date of the issuance of our financial statements. Accordingly, there is substantial doubt about our ability to continue as a going concern.

While we generate revenues from our CDMO activities, these revenues are not currently sufficient to fund our operations. Our ability to continue as a going concern is dependent on our ability to obtain additional financing, reduce costs and manage our liabilities as they become due. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all, particularly in light of current market conditions and our market capitalization.

We will require substantial additional financing not only to continue our operations but also to support the growth of our CDMO business and advance our therapeutic development programs. We expect to continue to incur significant operating and capital expenditures, including costs related to expanding our CDMO capabilities, research and development activities, manufacturing and regulatory compliance.

If we are unable to obtain sufficient financing, we may be required to delay, limit, reduce or terminate certain of our activities, implement additional cost-saving measures, or cease operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

***We have a history of operating losses and are not currently profitable. Although we generate revenues from our CDMO activities, we may continue to incur losses and may not achieve profitability in the near future, or at all.***

We have a history of operating losses and are not currently profitable, and we may not achieve or sustain profitability in the future.

We have incurred losses since inception, primarily as a result of research and development activities, clinical trials, investment in our manufacturing infrastructure and general administrative expenses. As of December 31, 2025 and December 31, 2024, we had an accumulated deficit of $122.0 million, $117.6 million and $122.5 million, respectively.

Although we generate revenues from our CDMO activities, these revenues have been limited to date and are not sufficient to offset our operating expenses. Our product candidates are at an early stage of development and do not generate revenue. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we invest in the growth of our CDMO business and continue development activities.

To achieve and sustain profitability, we will need to generate significant additional revenues, including from our CDMO operations and, if successfully developed and commercialized, from our product candidates. There can be no assurance that we will be able to do so.

Our failure to achieve or maintain profitability, or delays in doing so, could adversely affect the value of our securities and our ability to raise additional financing.

***We cannot precisely estimate our future capital requirements, and failure to secure adequate funding could adversely affect our business.***

 ****

As of December 31, 2025 and December 31, 2024, we had approximately $1.6 million and $1.9 million, respectively, in cash and cash equivalents and short-term deposits, working capital of $0.46 million and $0.59 million, respectively, and an accumulated deficit of $125.8 million and $117.6 million, respectively. Our existing cash resources are not sufficient to fund our projected cash requirements at current operating levels for at least the next 12 months.

Our future capital requirements will depend on many factors, including:

● our ability to establish and maintain strategic partnerships, licensing or other arrangements, and the financial terms of such agreements;

● costs associated with expanding our CDMO capabilities;

● our ability to generate meaningful revenues from our CDMO business;

● our ability to identify and pursue new business opportunities;

● our ability to identify, acquire rights to, or independently develop new product candidates;

● the scope, timing and costs of research and development, regulatory approval, manufacturing and commercialization of any product candidates;

● the costs associated with attracting and retaining qualified personnel; and

● potential product liability or other litigation related to our activities or any current or future product candidates.

Due to these and other factors, many of which are outside our control, we will require additional funding to support our operations. We may seek such funding through public or private equity or debt financings, strategic collaborations, licensing arrangements or other non-dilutive sources. However, such funding may not be available on acceptable terms, or at all, particularly if we are unable to maintain our Nasdaq listing.

If we are unable to obtain sufficient funding when needed, we may be required to delay, limit, reduce or terminate our CDMO activities, product development programs or other operations. Any such outcome would materially and adversely affect our business, financial condition and results of operations.

***Our business strategy, including the development and growth of our CDMO business alongside our therapeutic pipeline, may not be successful.***

 ****

Our current business strategy involves operating a contract development and manufacturing organization (CDMO) business while continuing to advance our therapeutic development programs. This strategy requires us to successfully manage and allocate resources between these activities, each of which has different operational, financial and risk profiles.

Our ability to grow our CDMO business depends on a number of factors, including market demand for our services, our ability to attract and retain customers, our ability to execute contracts on commercially acceptable terms, and our ability to scale our manufacturing and operational capabilities efficiently. There can be no assurance that we will be successful in achieving these objectives or that our CDMO business will generate sufficient revenues to support our operations.

At the same time, our therapeutic development activities are subject to the risks inherent in early-stage biopharmaceutical development, including significant costs, long development timelines and uncertainty regarding regulatory approval and commercial success.

Our strategy requires significant management attention and financial resources, and we may face challenges in effectively balancing and prioritizing these activities. If we are unable to successfully execute our strategy, including the growth of our CDMO business and the advancement of our pipeline, our business, financial condition and results of operations could be materially and adversely affected.

***Raising additional capital may cause dilution to our existing shareholders, and debt financing, if available, while an inability to raise additional capital may restrict our operations or require us to relinquish rights to our technologies or product candidate(s).***

We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring future indebtedness, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships, alliances and licensing arrangements with third parties, we may have to relinquish

**Risks Related to Development, Clinical Testing and Regulatory Approval of NanoAbs and any Other Current and Future Product Candidate(s)**

***Our IL-17 program is subject to significant contractual, development and strategic uncertainties***

 ****

Our IL-17 development program is subject to significant development, strategic and contractual uncertainties. Under our license agreement with Max Planck Gesellschaft ("MPG") and University Medical Center Göttingen ("UMG"), we are required to meet certain development milestones, including the submission of an Investigational New Drug (IND) application within specified timelines. We have requested extensions to the applicable IND submission deadline in order to support modifications to our development strategy. There can be no assurance that such extensions will be granted, or that any extension will not be subject to additional conditions, including potential payments. If we are unable to obtain the requested extensions or satisfy any related conditions, we may be at risk of losing our rights under the license agreement.

In parallel, we have been reassessing the development strategy for our IL-17 program. Our initial approach focused on an intradermal IL-17-targeting therapy; however, this approach has presented scientific and technical challenges, including formulation and delivery considerations. As a result, we are evaluating alternative approaches, including the use of nanoAbs as components in more complex biologic constructs, such as multi-specific antibodies, which may require additional development time and investment.

In addition, the therapeutic landscape for IL-17-targeting therapies has become increasingly competitive, with multiple approved products and development-stage candidates addressing overlapping indications. In this environment, a new IL-17-targeting monotherapy may face significant commercial challenges unless it demonstrates meaningful differentiation. These factors have contributed to our ongoing evaluation of the strategic direction, development approach and overall prioritization of our IL-17 program.

As a result of the foregoing, there can be no assurance that we will continue to pursue the IL-17 program under its current structure, on its current timeline, or at all. Any decision to modify, delay or discontinue the program could result in the loss of rights under the applicable license agreement and may have a material adverse effect on our business and prospects.

***We have not yet commercialized any product candidate(s), and we may never become profitable.***

We are party to licensing and research collaboration arrangements with MPG and UMG pursuant to which we are developing a pipeline of VHH antibody fragment (NanoAb) drug candidates targeting diseases with significant unmet medical need and potential commercial opportunity. Our initial licensed program focused on an inhalable COVID-19 NanoAb. While preclinical studies demonstrated promising results in an industry-accepted animal (hamster) model, the market for COVID-19 therapeutics has declined significantly, along with available capital. As a result, we suspended further development of this program and, together with the licensors, elected to abandon the related patents due to limited industry and investor interest and the costs associated with maintaining such assets. Our current development focus is on NanoAbs targeting Interleukin-17 (IL-17), which we licensed in June 2023, initially for indications such as plaque psoriasis and psoriatic arthritis. In addition, we have entered into an option agreement to acquire Pincell srl, the owner of PC111, a monoclonal antibody targeting soluble Fas ligand, and we are exploring additional NanoAb licensing opportunities under our existing collaborations.

Notwithstanding the foregoing, we currently have no product candidates in clinical trials or on the market, and our preclinical pipeline remains limited. Even if we successfully advance one or more product candidates, we will not achieve commercial success unless we complete development, obtain regulatory approvals, and achieve market acceptance at favorable pricing and reimbursement levels.

The degree of market acceptance of any current or future product candidates will depend on a number of factors, including:

● the timing, scope and outcome of regulatory approvals, if any;

● the competitive landscape;

● demand for our product candidates;

● the ability to demonstrate safety, efficacy and clinical differentiation;

● our ability to enter into strategic partnerships for development, commercialization or distribution;

● the effectiveness of our marketing and commercialization capabilities;

● our ability to manufacture at scale with consistent quality; and

● pricing, coverage and reimbursement decisions by governmental and third-party payors.

Physicians, patients, payors and the broader medical community may be unwilling to accept, adopt or reimburse our product candidates. As a result, we cannot predict the extent of our future losses or the time required to achieve profitability, if ever. Even if we successfully develop one or more product candidates, we may never become profitable. In addition, we currently have limited internal marketing and commercial capabilities. If we are unable to enter into partnerships with third parties that have established commercialization infrastructure, we may need to build our own sales and marketing organization, which would require significant time, resources and capital. We may be unable to do so effectively or at all, which could delay or prevent successful commercialization.

***NanoAbs represent a relatively new approach to treating diseases, and we must overcome significant challenges in order to successfully develop, commercialize and manufacture product candidates based on this technology.***

We are currently concentrating our development efforts on the IL-17 NanoAb as a treatment for all potential indications where IL-17 plays a meaningful role, starting with psoriasis and psoriatic arthritis. The processes and requirements imposed by the U.S. Food and Drug Administration (the "FDA") or other applicable health authorities may cause delays and additional costs in obtaining approvals for marketing authorization for our products. Because our platform is relatively new and only one drug developed by a competing company and related to rare blood diseases has been approved to date in the market, regulatory agencies, as well as insurance and other coverage providers and payers, may lack experience in evaluating our product candidates. This inexperience may lengthen the regulatory review process, increase our development costs and delay or prevent reimbursement and commercialization of our platform products. Additionally, advancing this novel platform creates significant challenges for us, and we must be able to overcome these challenges in order to successfully develop, commercialize and manufacture our product candidates.

***In light of our current resources and limited commercial experience, we have and may need to continue to establish third-party relationships to successfully develop, commercialize and market our pipeline candidates.***

Our long-term commercial viability may depend, in part, on our ability to successfully execute current strategic collaborations and establish new strategic collaborations with contract commercial organizations, pharmaceutical and biotechnology companies, non-profit organizations, and government agencies. Establishing and maintaining strategic collaborations and obtaining government funding is difficult and time-consuming. Potential collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position or based on their internal pipeline or available resources; government agencies may reject contract or grant applications based on their assessment of public need, the public interest, the ability of our products to address these areas, or other reasons beyond our expectations or control. If we fail to establish or maintain collaborations necessary for successful development, commercialization and marketing on acceptable terms, we may not be able to develop, commercialize or market product candidates or generate sufficient revenue to fund further research and development efforts.

***New or existing collaborations, including our collaboration with MPG and UMG, may never result in the successful development or commercialization of any pipeline candidates for several reasons, including the fact that***:

● we may not have the ability to control the activities of our partners and cannot provide assurance that they will fulfill their obligations to us, including with respect to the license, development, manufacture and commercialization of pipeline candidates, in a timely manner or at all;

● such partners may not devote sufficient resources to our pipeline candidates or properly maintain or defend our intellectual property rights (if required);

● such partners may decide to pursue competitive product candidates developed outside of the partnership arrangement;

● any failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development or commercialization of our pipeline candidates and affect our ability to realize product revenue;

● disagreements, including disputes over the ownership of technology developed with such collaborators, could result in litigation, which would be time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals, and commercialization activities; and

● such partners may decide to terminate or not to renew the collaboration for these or other reasons.

If we or our collaborators fail to maintain our existing agreements or in the event we fail to establish agreements as necessary, we could be required to undertake research, development, manufacturing, and commercialization activities solely at our own expense. These activities would significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly delay the commercialization of our pipeline candidates.

***We may be unable to exercise our option to acquire Pincell, or if we exercise the option we may be required to resell our shares in Pincell to the previous shareholder, either of which will affect our future prospects***.

On March 27, 2025, we announced that we had entered into a binding option agreement for the acquisition of Pincell, the owner of PC111, a monoclonal antibody in development for treating Pemphigus, Steven Johnson's Syndrome (SJS) and Toxic Epidermal Necrolysis (TEN). Pursuant to the terms of the option agreement with Pincell, we had the right to exercise, at our sole discretion, a full sale and transfer of Pincell's shares by the end of 2025, subject to approval of the Golden Power regulatory clearance by the Italian government and satisfaction of certain closing requirements, which include the requirement to either obtain an award of a grant to our wholly owned Polish subsidiary under the European Funds for a Modern Economy (FENG) program in Poland or secure $3 million by December 31, 2025 to fund the development of PC111. On September 11, 2025, the parties entered into a first amendment to the option agreement, extending the deadlines for fulfillment of the option conditions and exercise of the option. On February 28, 2026, the parties entered into a second amendment to the option agreement, further extending the deadline for fulfillment of the option conditions to August 31, 2026, and the exercise of the option to September 30, 2026.

On June 5, 2025, we announced that the Italian government had granted Golden Power regulatory clearance.

On September 18, 2025, we received notification from the Polish National Center for Research and Development that our application for the award of a grant under the FENG program was not selected for funding. We filed an appeal, which was subsequently rejected for reasons relating to not sufficiently addressing the potential national impact and innovation of the portion of the project to be funded by the grant proceeds as reflected in the application. On March 2, 2026, we announced that we plan to submit by March 31st a revised application to the FENG program reflecting structural enhancements to project design and translational scope.

If we are not successful in either obtaining the grant under the FENG program or securing $3 million by August 31, 2026 to fund the development of PC111, we will be unable to exercise the option. If we are unable to exercise the option, our future prospects will be affected.

In addition, pursuant to the option agreement, if we or our affiliates have not filed an IND application for PC111 to the FDA, or any similar dossier application in a country other than the U.S., by December 31, 2028, the option agreement grants each seller the right to repurchase the shares of Pincell it sold to us for the lower of (i) the fair market value of Pincell and (ii) the sum funded by us or our affiliates into Pincell at that time (but in any event not less than the nominal value of the shares of Pincell). If we have difficulty in funding the development of PC111, including if we exercise our option to acquire Pincell but do not receive the grant from the FENG program in Poland, or if for any other reason we do not file an IND application for PC111 to the FDA, or any similar dossier application in a country other than the U.S., by December 31, 2028, we will be required to resell our shares in Pincell to the previous shareholders of Pincell, which will affect our future prospects.

***Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required, and we may not adequately develop such protocols to support approval.***

In addition to FDA requirements and those of other regulatory authorities, an independent institutional review board or an independent ethics committee at each medical institution proposing to participate in the conduct of the clinical trial generally must review and approve the clinical trial design and patient informed consent form before commencement of the study at the respective medical institution. The institutional review boards approve the clinical trial protocols and conduct periodic reviews of the clinical trials. The clinical trial protocols describe the type of people who may participate in the clinical trial, the schedule of tests and procedures, the medications and dosages to be studied, the length of the study, the study's objectives, and other details. In general, the institutional review board will consider, among other matters, ethicastil factors, the safety of human subjects and the possibility of liability of the institution conducting the trial. Our pre-clinical studies may not be adequate proof of safety and efficacy, and as a result, we may not be successful in developing clinical trial protocols necessary to support institutional review board approval. Any delay or failure to obtain institutional review board approval to conduct a clinical trial at a prospective site could materially impact the costs, timing, or successful completion of a clinical trial.

***Current and future product candidates would be subject to extensive regulation and may never obtain regulatory approval.***

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The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidate(s) are subject to extensive regulation by the Food and Drug Administration (the "FDA") in the United States (the "U.S.") as detailed in Title 21 of the U.S. Code or elsewhere and by comparable authorities in foreign markets. In the U.S., we are not permitted to market our product candidate(s) until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the product candidate(s) involved, as well as the target indications and patient population. Current and future product candidates must satisfy rigorous standards of safety and efficacy before product candidates can be approved for commercial use by the European Medicines Agency (the "EMA") in the European Union (the "EU") or the FDA in the U.S., or any other regulatory authorities for all or any of the indications for which product candidates are intended to be used. The EMA, FDA and any other regulatory authorities have substantial discretion over the approval process, and approval is never guaranteed. We may need to conduct significant additional research before we can file applications for product approval. Typically, in the pharmaceutical industry, there is a high rate of attrition for product candidates in clinical trials. Success in early clinical trials does not ensure that later clinical trials will be successful. For example, a number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials.

The FDA or comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate(s) for many reasons, including:

● such authorities may disagree with the design or implementation of our clinical trials;

● we may be unable to demonstrate to the satisfaction of the FDA or other comparable regulatory authorities in foreign markets that a product candidate(s) is safe and effective for any indication;

● such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the U.S.;

● we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

● such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

● approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use; or

● such authorities may find deficiencies in manufacturing processes or facilities, including the processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies.

In addition, delays or rejections may be encountered based upon additional government regulation, including any changes in legislation or policy of the EMA, FDA or any other regulatory policy, during the process of product development, clinical trials and regulatory reviews. Approval procedures vary among countries, and may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased cautiousness by the EMA, FDA and comparable foreign regulatory authorities in reviewing new pharmaceutical products based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Failure to obtain EMA, FDA or any other regulatory approval for current and future product candidates in a timely manner or at all will severely undermine our business by delaying or halting commercialization of our products, imposing costly procedures, diminishing competitive advantages and reducing the number of saleable products and, therefore, corresponding product revenues.

***Current and future product candidates will remain subject to ongoing regulatory requirements even if we receive regulatory approval to market such product candidate(s), and if we fail to comply with such requirements, we could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.***

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

● suspension or imposition of restrictions on the product candidate(s), manufacturers or manufacturing processes, including costly new manufacturing requirements;

● warning letters;

● civil or criminal penalties, fines and/or injunctions;

● product seizures or detentions;

● import or export bans or restrictions;

● voluntary or mandatory product recalls and related publicity requirements;

● suspension or withdrawal of regulatory approvals;

● total or partial suspension of production; and

● refusal to approve pending applications for marketing approval of new product candidate(s) or supplements to approved applications.

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

***Current and future product candidates, if approved, may face competition sooner than anticipated.***

Our product candidates may face serious competition from other products targeting the same disease or condition, including biosimilar products. In the United States, to the extent any of our current or future product candidates are regulated as biologic products and approved under a biologics license application, or BLA, they may be subject to competition under the abbreviated biosimilar pathway established by the Biologics Price Competition and Innovation Act of 2009, or BPCIA. Under current U.S. law, a biosimilar application generally may not be submitted until four years after the date on which the reference product was first licensed by the FDA, and FDA generally may not make approval of such biosimilar effective until twelve years after the date of first licensure of the reference product, subject in certain cases to an additional six-month pediatric exclusivity period. These exclusivity protections are separate from, and do not replace, patent protection.

In the European Union, biologic products are subject to a different regulatory exclusivity framework. Under current EU rules, medicinal products generally benefit from eight years of data exclusivity and ten years of market protection, which may in certain cases be extended by one additional year. As a result, biosimilar competition in the European Union may arise on a different timetable than in the United States.

In addition, another company may seek approval of a competing biologic through a full regulatory submission based on its own preclinical and clinical data rather than through an abbreviated biosimilar pathway. Further, the legal and regulatory framework governing biologics, biosimilars, regulatory exclusivity and competition in both the United States and Europe is complex and may change as a result of future legislation, regulatory action, judicial decisions or broader pharmaceutical reform initiatives. For example, the European Union is currently considering significant reforms to its pharmaceutical legislation, including changes to regulatory protection periods. Any such developments could permit competition earlier than we anticipate or otherwise adversely affect the commercial prospects of our product candidates, if approved.

Although, if approved, we expect our biologic product candidates to be eligible for regulatory exclusivity under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, there can be no assurance that such exclusivity will be granted or that it will provide the scope or duration of protection we anticipate. For example, the FDA may determine that one or more of our products does not qualify as a reference product, which could allow earlier biosimilar competition.

In addition, the duration and scope of regulatory exclusivity for biologic products in the United States remains subject to potential legislative, regulatory and policy changes, including those driven by broader healthcare and drug pricing reform efforts. Any such changes could reduce the period of exclusivity or otherwise facilitate earlier competition.

The legal and regulatory framework governing biosimilars, including issues related to interchangeability, substitution and market uptake, continues to evolve through FDA guidance, regulatory practice and litigation. These factors may impact the extent to which biosimilar products, once approved, are able to compete effectively with any of our products.

Furthermore, a competitor may seek approval of a competing biologic through a full BLA supported by its own preclinical and clinical data, rather than relying on the abbreviated biosimilar pathway. In such cases, any regulatory exclusivity to which we may be entitled would not prevent such competitor from obtaining approval and marketing its product upon approval.

In the European Union and other jurisdictions, regulatory exclusivity frameworks differ from those in the United States and are also subject to change, including ongoing legislative reform initiatives. As a result, the timing and extent of potential competition for our product candidates, if approved, may vary across jurisdictions and may occur sooner than we anticipate.

***If the results of any future clinical trials show that current and future product candidates are effective based on certain endpoints but nevertheless fail to achieve all the primary/secondary endpoint(s) requiring us to conduct additional clinical trials, or if clinical trials that we conduct for such products in the future are prolonged or delayed, we would be unable to commercialize current and future product candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenues from potential sales of such product candidate(s).***

If we fail to achieve all the primary/secondary endpoints, then we may be required by the FDA or any other regulatory authority to conduct additional clinical studies. We cannot predict whether we will encounter problems with any such clinical trials that will cause us or any regulatory authority to delay or suspend those clinical trials or delay the analysis of data derived from them. A number of events, including any of the following, could delay the completion of any such additional clinical trials and negatively impact our ability to obtain regulatory approval for, and to market and sell, a particular product candidate(s):

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

● delays in recruiting and enrolling participants or volunteers into any potential future clinical trials;

● delays in obtaining, or our inability to obtain, required approvals from institutional review boards ("IRBs") or other reviewing entities at clinical sites selected for participation in our clinical trials;

● insufficient supply or deficient quality of our product candidate(s) or other materials necessary to conduct our clinical trials;

● lower than anticipated retention rate of subjects and participants in clinical trials;

● negative or inconclusive results from clinical trials, or results that are inconsistent with earlier results, that necessitate additional clinical studies;

● serious and unexpected drug-related side effects experienced by subjects and participants in clinical trials; or

● failure of our third-party contractors to comply with regulatory requirements or otherwise meet their contractual obligations to us in a timely manner.

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

Prior to commencing clinical trials in the U.S., we must submit an Investigational New Drug ("IND") application to the FDA and the IND application must become effective.

Delays in any clinical trials the FDA or EMA may require us to conduct will result in increased development costs for current and future product candidates. In addition, if any such clinical trials are delayed, our competitors may be able to bring products to market before we do and the commercial viability of current and future product candidates could be limited.

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

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

● unforeseen safety issues;

● determination of proper dosing;

● lack of effectiveness or efficacy during clinical trials;

● failure of our contract manufacturers or inability of our in-house facility to manufacture our product candidate(s) in sufficient quantities and in accordance with current good manufacturing practices, or cGMP;

● our failure or the failure of third party suppliers to perform final manufacturing steps for the drug substance;

● slower than expected rates of participant recruitment and enrollment;

● lack of healthy volunteers and participants to conduct trials;

● inability to monitor participants adequately during or after treatment;

● failure or delay in reaching an agreement with a third party contract research organization or clinical trial site(s), and failure of third party contract research organizations to properly implement or monitor the clinical trial protocols;

● failure of the FDA, Institutional Review Boards ("IRBs"), or other regulatory bodies to authorize our clinical trial protocols, or a decision by a regulatory body to place one or more of our trials on hold;

● inability or unwillingness of medical investigators and Contract Research Organizations to follow our clinical trial protocols and applicable regulatory requirements; and

● lack of sufficient funding to finance the clinical trials.

In addition, we or regulatory authorities may suspend or terminate our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks, if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of these trials, if inspection of the clinical trial operations or trial site by a regulatory authority results in the imposition of a clinical hold, or if there is a failure to demonstrate a benefit from using the product candidate(s), or changes in governmental regulations or administrative actions. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact our ability to develop product candidate(s) and generate revenue.

***We may in the future conduct clinical trials of current and future product candidates at sites outside the U.S., and the FDA may not accept data from trials conducted in foreign locations.***

We may in the future conduct clinical trials of current and future product candidates outside of the U.S. Although the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the FDA. For example, under 21 Code of Federal Regulations ("CFR") 312.20, the clinical trial must be well designed and conducted in accordance with good clinical practice, or GCP, requirements, and the FDA must be able to validate the clinical trial data through an on-site inspection, if necessary, among other things. If a marketing application is based solely on foreign clinical data, the FDA can require such data to be applicable to the U.S. population and U.S. medical practice, and for the clinical trials to have been performed by clinical investigators of recognized competence. There can be no assurance the FDA will accept data from trials conducted outside of the U.S. If the FDA does not accept the data from any clinical trials that may be conducted outside of the U.S. of current and future product candidates, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of the product candidate(s).

***Positive results from earlier preclinical data and clinical trials may not be predictive of the results in later clinical trials of current and future product candidates, and the results of our clinical trials may not be replicated in additional clinical trials that we may be required to conduct, which could result in development delays or a failure to obtain marketing approval.***

Positive results from previous clinical trials may not be predictive of the results of later clinical trials of current and future product candidates, and any early clinical trials may not be predictive of results in later clinical trials that we may conduct. A number of companies in the pharmaceutical and biopharmaceutical industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from preclinical studies and clinical trials for current and future product candidates may not be predictive of the results we may obtain in later stage trials.

Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA or European Medicines Agency, or other applicable regulatory agency, approval for their product candidates.

***We face significant technical, regulatory and execution risks related to the development of NanoAb product candidates across different delivery formats.***

Our nanobody platform supports multiple product formats, including local (intradermal), inhaled and systemic antibody-based approaches. However, each of these approaches presents distinct development challenges and uncertainties. Local intradermal delivery, which was initially pursued for our anti-IL-17 NanoAb program, may require sustained-release formulations, specialized delivery devices and novel clinical approaches. These requirements may increase development timelines, costs and regulatory uncertainty, and there can be no assurance that such approaches will result in a clinically or commercially viable product. Systemic applications of nanobodies, including bi-specific or multi-specific antibody formats, require drug engineering, manufacturing capabilities and development expertise that we do not fully possess in-house and may need to access through third-party collaborations. These approaches may also involve additional complexity in design, manufacturing and regulatory approval. As a result, we may be required to reprioritize, delay or discontinue certain development programs, and there can be no assurance that any of our product candidates will successfully advance through development or achieve regulatory approval.

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

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

***The occurrence of serious complications or side effects in connection with current and future product candidates, either in future clinical trials we may conduct or post-approval, could impede such future clinical trials, if any, and lead to refusal of regulatory authorities to approve our product candidate(s) or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business, prospects, operating results and financial condition.***

In any future clinical trials of current and future product candidates that we may conduct, or following regulatory approval, illnesses, injuries, discomforts and other adverse events may be reported by subjects. In addition, side effects are sometimes only detectable after they are made available to patients on a commercial scale after approval. Results of any future clinical trials we may undertake for current and future product candidates could reveal a high and unacceptable severity and prevalence of such side effects. In such an event, any clinical trials we may conduct could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of current and future product candidates for any or all targeted indications. Drug-related side effects could affect patient recruitment for any clinical trials we may conduct or the ability of enrolled participants to complete such trials or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

In addition, if current and future product candidates receive marketing approval, and we or others later identify undesirable side effects caused by such product candidate(s), a number of potentially significant negative consequences could result, including:

● such authorities may disagree with the design or implementation of our clinical trials;

● we may be unable to demonstrate to the satisfaction of the FDA or other comparable regulatory authorities in foreign markets that a product candidate(s) is safe and effective for any indication;

● such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the U.S.;

● we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

● such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

● approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use; or

● such authorities may find deficiencies in manufacturing processes or facilities.

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

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

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Research programs designed to identify current and future product candidates may require substantial technical, financial and human resources, whether or not such efforts are successful. Our research programs may initially show promise in identifying current and future product candidates, yet fail to lead to clinical development or commercialization for many reasons, including the following:

● the research methodology used may not be successful in identifying potential product candidate(s);

● competitors may develop alternatives that render our product candidate(s) obsolete;

● a product candidate(s) may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

● a product candidate(s) may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and

● a product candidate(s) may not be accepted as safe and effective by regulatory authorities, participants, the medical community or third-party payors.

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

***Inadequate funding, resource constraints or shifting priorities at regulatory authorities may delay the development and approval of our product candidates.***

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The ability of the U.S. Food and Drug Administration (FDA) and other regulatory authorities, including European agencies such as the Paul-Ehrlich-Institut (PEI), to review and approve product candidates, provide scientific advice, and respond to regulatory submissions depends on a variety of factors, including government funding levels, staffing, regulatory priorities and policy changes. Any constraints on resources or changes in priorities may result in delays in regulatory interactions, including scientific advice meetings, review of submissions and approval timelines. Our development programs rely on timely feedback and engagement from regulatory authorities to define development pathways, including clinical trial design, manufacturing requirements and product positioning. Delays or disruptions in regulatory processes may adversely affect our ability to advance our programs, particularly for product candidates involving novel approaches, such as local delivery or complex biologic formats, where regulatory expectations may be less established. In addition, government budget constraints, shutdowns or other disruptions may limit the ability of regulatory agencies to perform routine functions, including the review of investigational applications and marketing submissions. Any such delays could extend development timelines, increase costs and adversely affect our business, financial condition and results of operations.

***Coverage and reimbursement may not be available for current and future product candidates (if and when approved for commercial sale), which could make it difficult for us to sell such product candidates profitably.***

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

In the United States, no uniform policy of coverage and reimbursement for pharmaceutical products exists among third-party payors. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. Therefore, coverage and reimbursement for pharmaceutical products can differ significantly from payor to payor. Certain Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act marketplace and other private payor plans are required to include coverage for certain preventative services, including vaccinations recommended by the U.S. Centers for Disease Control's, or CDC's, Advisory Committee on Immunization Practices, or ACIP, without cost share obligations (i.e., co-payments, deductibles or co-insurance) for plan members. For Medicare beneficiaries, vaccines may be covered for reimbursement under either the Part B program or Part D depending on several criteria, including the type of vaccine and the beneficiary's coverage eligibility. If our vaccine candidate(s), once approved, is reimbursed only under the Part D program, physicians may be less willing to use our product candidate(s) because of the claims adjudication costs and time related to the claims adjudication process and collection of co-payments associated with the Part D program.

Outside the United States, certain countries, including a number of member states of the European Union, set prices and reimbursement for pharmaceutical products, with limited participation from the marketing authorization holders. We cannot be sure that such prices and reimbursement will be acceptable to us or our partners, if any. If the regulatory authorities in these jurisdictions set prices or reimbursement levels that are not commercially attractive for us, our revenues from sales by us, and the potential profitability of our product candidate(s), in those countries would be negatively affected. Additionally, some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. As a result, we might obtain marketing approval for a product candidate(s) in a particular country, but then may experience delays in the reimbursement approval of our product candidate(s) or be subject to price regulations that would delay our commercial launch of the product candidate(s), possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of the product candidate(s) in that particular country.

***Current and future healthcare legislation and pricing regulations may adversely affect our ability to obtain approval for, commercialize, and achieve profitability from our product candidates.***

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In the United States and other jurisdictions, there have been and continue to be legislative and regulatory efforts to control healthcare costs, including measures affecting drug pricing, reimbursement and market access. These efforts may reduce the demand for, or the price that may be obtained for, newly approved therapies. Recent and potential future reforms, including those affecting Medicare and other government healthcare programs, may result in increased pressure on drug pricing, expanded rebate obligations, limitations on reimbursement or increased scrutiny of the value and cost-effectiveness of new therapies. In addition, private payors are increasingly adopting similar cost-containment measures. Because we do not currently have approved products, our ability to successfully commercialize any future product candidates will depend significantly on coverage and reimbursement decisions by government and private payors. These decisions are uncertain and may be influenced by evolving regulatory and legislative policies. Any changes in healthcare laws, regulations or reimbursement policies, or their interpretation, may increase the cost of obtaining regulatory approval, delay commercialization, reduce the prices we are able to charge, or otherwise adversely affect our business, financial condition and results of operations.

***We are subject to extensive and costly government regulation.***

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

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

***Our relationships with customers, third-party payors, physicians and healthcare providers will be subject to applicable anti-kickback, fraud and abuse, and other healthcare laws and regulations, which could expose us to significant liability and adversely affect our business.***

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Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and use of any product candidates for which we obtain marketing approval. Our current and future arrangements with customers, third-party payors and healthcare providers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we conduct research and, if approved, market, sell and distribute our product candidates.

Although we do not currently control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patient rights may apply to our business. These laws and regulations include, among others:

● the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, to induce or reward referrals of, or the purchase, lease, order or recommendation of, any item or service reimbursable under a federal healthcare program such as Medicare or Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation, and it has been interpreted to apply broadly to arrangements between pharmaceutical manufacturers and prescribers, purchasers and formulary managers;

● federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment to the federal government or knowingly making or using false records or statements material to such claims. Manufacturers may be held liable even if they do not submit claims directly if they are deemed to have "caused" the submission of false claims. In addition, violations of the Anti-Kickback Statute may form the basis for liability under the False Claims Act. The False Claims Act also allows private individuals to bring actions on behalf of the government and share in any recovery;

● the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which includes criminal provisions that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program or making false statements in connection with the delivery of or payment for healthcare benefits, items or services;

● the federal Physician Payments Sunshine Act and its implementing regulations (commonly referred to as the Open Payments program), which require certain manufacturers of drugs, biologics and medical devices reimbursable under federal healthcare programs to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments or other transfers of value to physicians, teaching hospitals and certain non-physician healthcare providers, as well as ownership and investment interests;

● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and practices that may harm consumers; and

● analogous state and foreign laws and regulations, including state anti-kickback and false claims laws, state transparency laws and laws that may require pharmaceutical companies to comply with industry compliance standards or restrict payments to healthcare providers.

Ensuring that our business arrangements comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities may conclude that our business practices do not comply with such laws and regulations. If our operations or arrangements are found to be in violation of any applicable laws, we may be subject to significant civil, criminal and administrative penalties, including fines, damages, disgorgement, exclusion from participation in government healthcare programs such as Medicare and Medicaid, reputational harm, and the curtailment or restructuring of our operations. We may also be subject to additional reporting obligations or oversight if we become subject to a corporate integrity agreement or similar arrangement.

If our partners or counterparties, including healthcare providers or other third parties, are found to be non-compliant with applicable laws, we may also be exposed to liability or reputational harm, which could adversely affect our business, financial condition and results of operations.

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

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

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

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

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***Natural disasters, public health emergencies and other disruptions could adversely affect our business, operations and ability to execute our development and commercialization plans.***

Our operations and those of our partners and suppliers may be adversely affected by natural disasters, public health emergencies, geopolitical events or other disruptions, including pandemics, epidemics, or other widespread health crises. Such events may result in travel restrictions, workforce disruptions, supply chain interruptions, limitations on business operations or other government-imposed measures that could negatively impact our activities.

We rely on third parties, including contract research organizations (CROs), contract manufacturing organizations (CMOs), suppliers and collaborators, to support our development programs and operations. Disruptions affecting these parties may impair their ability to perform their obligations, which could delay or disrupt our research, development, manufacturing or future commercialization efforts. In addition, such events may adversely affect global financial markets and economic conditions, which could reduce our ability to raise capital on acceptable terms or at all. Public health emergencies and other disruptions may also impact the operations of regulatory authorities, including the U.S. Food and Drug Administration (FDA) and foreign regulators, potentially delaying regulatory interactions, inspections and the review of submissions.

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While we maintain business continuity plans, these plans may not be sufficient to mitigate the impact of such events. The extent to which any such disruption may affect our business, financial condition and results of operations will depend on future developments that are uncertain and beyond our control

**Risks Related to Our CDMO Business Unit**

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***Our CDMO business is relatively new and may not achieve commercial success, which could adversely affect our results of operations and financial condition****.*

In September 2023, we launched Scinai Bioservices as a CDMO business unit to provide process development and GMP manufacturing services to biotechnology companies. This business represented a strategic shift in our operations and exposes us to a range of risks associated with building and scaling a service-based business.

We have limited operating history in providing CDMO services and may face challenges in attracting and retaining customers, achieving sufficient facility utilization, and generating recurring revenues. Our ability to grow this business will depend on our ability to compete with established CDMOs that have greater resources, broader capabilities and longer track records. In addition, our CDMO activities are subject to strict regulatory requirements, including compliance with current Good Manufacturing Practices (cGMP). Any failure to maintain compliance or to meet quality standards could result in regulatory action, loss of customers, reputational harm and potential liability.

Our success depends on our ability to hire, train and retain personnel with relevant technical and operational expertise, manage complex projects, and maintain efficient and reliable operations. We may also be exposed to credit risk from customers, delays in customer programs, or variability in demand, which could impact our revenues and cash flow.

If we are unable to successfully execute our CDMO strategy, achieve sustainable customer demand, or operate efficiently and in compliance with applicable regulations, our business, financial condition and results of operations may be materially adversely affected.

***We may not achieve the expected benefits from our acquisition of Recipharm Israel Ltd. (now Scinai Biopharma Services Ltd.) and our related strategic collaboration with Recipharm, and we may encounter significant integration challenges.***

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On February 17, 2026, we acquired 100% of the shares of Recipharm Israel Ltd., which operates a manufacturing site in Yavne, Israel, and entered into a long-term strategic commercial collaboration with Recipharm. Following the acquisition, the entity was renamed Scinai Biopharma Services Ltd. ("Scinai Biopharma"). We expect this transaction to enhance our CDMO capabilities, including expanding into small-molecule manufacturing alongside peptides and liposomes, strengthening our industrial credibility and broadening our service offering and client base. However, there can be no assurance that we will realize these anticipated benefits.

The success of this transaction depends on a number of factors, including our ability to effectively integrate the acquired operations into our existing business. The integration process is complex and may involve challenges, including aligning quality systems and regulatory compliance processes, integrating financial reporting and internal controls, maintaining operational continuity, and managing manufacturing activities efficiently. In addition, the success of the acquisition and collaboration depends on our ability to retain key personnel and customers, avoid disruptions to ongoing projects, and successfully execute on the strategic collaboration with Recipharm.

We may also encounter unforeseen costs, operational difficulties or delays associated with the integration of the acquired business, and the integration process may place a significant burden on management and require substantial time and resources, potentially diverting attention from other strategic priorities. Furthermore, the expected commercial benefits of the collaboration with Recipharm may not materialize to the extent anticipated, or at all.

If we are unable to successfully integrate Scinai Biopharma and realize the expected benefits of the acquisition and collaboration in a timely and efficient manner, our business, financial condition and results of operations may be materially adversely affected.

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***External competition from other CDMO providers may be harmful to our planned CDMO business*.** 

We face competition from other companies that are large, well-established manufacturers with financial, technical, research and development and sales and marketing resources that are significantly greater than ours. To be successful, we will need to convince potential clients that our overall value proposition is superior to the one of other CDMOs. Our ability to achieve this and to successfully compete against other manufacturers will depend, in large part, on our success in developing processing technologies that improve the efficiency of and reduce the cost and/or time associated with drug development projects. If we are unable to successfully demonstrate our competitive advantages, we may not be able to compete against other CDMOs and generate significant revenues.

***Our CDMO business depends on our ability to attract and retain customers and on the level of spending by those customers on development and manufacturing services.***

Our CDMO revenues are dependent on our ability to secure new customers and maintain existing relationships, as well as on the level of activity and spending by our customers. Many of our customers are biotechnology companies whose spending is influenced by their access to capital, clinical progress and strategic priorities, which may change over time. Customers may delay, reduce or cancel projects for a variety of reasons, including financial constraints, changes in development strategy, clinical or regulatory setbacks, or a decision to bring activities in-house or shift to other service providers. As a result, our revenues may be variable and difficult to predict. In addition, consolidation within the pharmaceutical and biotechnology industries may reduce the number of potential customers or result in customers developing internal manufacturing capabilities, which could decrease demand for our services.

If we are unable to attract new customers, retain existing customers or maintain or grow customer spending, our CDMO revenues, utilization levels and profitability may be adversely affected. This, in turn, could negatively impact our business, financial condition and results of operations and may require us to seek additional capital.

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***CDMO services are highly complex and failure to provide quality and timely services to our CDMO clients could adversely impact our business.***

The CDMO services we offer can be highly complex, due in part to strict regulatory requirements and the inherent complexity of the services provided. A failure of our quality management systems and processes in our facilities could cause problems in connection with facility operations for a variety of reasons, including equipment malfunction, viral contamination, failure to follow specific manufacturing instructions, protocols and standard operating procedures, problems with raw materials or environmental factors. Such issues could affect production of a single manufacturing run or manufacturing campaigns, requiring the destruction of products, or could halt manufacturing operations altogether. In addition, any failure to meet required quality standards may result in our failure to timely deliver products to our clients which, in turn, could damage our reputation for quality and service. Any such incident could, among other things, lead to increased costs, lost revenue, reimbursement to clients for lost drug substances, damage to and possibly termination of client relationships, time and expense spent investigating and remediating the cause and, depending on the cause, similar losses with respect to other manufacturing runs. In addition, such issues could subject us to litigation, the cost of which could be significant.

***Problems may arise during the production of our products and product candidates, as well as those we produce for our CDMO clients, due to the complexity of the processes involved in their development, manufacturing and shipment or other factors. Significant delays in product manufacturing or development and our ability to produce sufficient quantities to meet the needs of our clients could cause delays in recognizing revenues, which would harm our business, financial condition, operating results and cash flows****.*

The majority of our products and our clients' products are complex biological drug candidates. Manufacturing biological drug candidates, especially in large quantities, is complex. The products must be made consistently and in compliance with a clearly defined manufacturing processes. Problems during manufacturing may arise for a variety of reasons, including problems with raw materials, equipment malfunction and failure to follow specific protocols and procedures. Slight deviations anywhere in the manufacturing process, including obtaining materials, maintaining master cell banks and preventing genetic drift, cell growth, fermentation, contamination including from particulates among other things, filtration, filling, labeling, packaging, storage and shipping, potency and stability issues and other quality control testing, may result in lot failures or manufacturing shut-downs, delays in the release of lots, product recalls, spoilage or regulatory action. Such deviations may require us to revise manufacturing processes or change manufacturers. Additionally, as our equipment ages, it will need to be replaced, which has the potential to result in similar consequences. Success rates can also vary dramatically at different stages of the manufacturing process, which can reduce yields and increase costs. From time to time, we may experience deviations in the manufacturing process that may take significant time and resources to resolve and, if unresolved, may affect manufacturing output and could cause us to fail to satisfy client orders or contractual commitments, lead to a termination of one or more of our contracts, lead to delays in our clinical trials, result in litigation, or other restrictions on the marketing or manufacturing of a product, any of which could be costly to us, damage our reputation and negatively impact our business. Regulatory action, including the issuance of Forms FDA 483 and warning letters, can also have an impact.

We may be required to ship biological candidates manufactured at our facility to clinical trial facilities at a prescribed temperature range and variations from that temperature range could result in loss of product and could significantly and adversely impact the related drug development program timelines, which could harm our business, financial condition, operating results and cash flows.

In addition, we may not be able to produce sufficient quantities to meet the rapidly changing demand or specifications of our clients on the desired timeframe, if at all. Our inability to produce sufficient quantities to meet the demand or specifications of our clients or the inability to timely obtain regulatory authorization to produce the products or product candidates of our clients could also harm our business, financial condition, operating results and cash flows.

**Risks Related to Our R&D Business Unit**

***The members of our management team are important to the efficient and effective operation of our business, and we may need to attract and retain additional management and experts. Our limited financial resources may hinder the successful retention of our management and consulting team and adding additional experts, which could have a material adverse effect on our business, financial condition or results of operations.***

Our executive officers, management team and technical personnel, as well as certain consultants, are important to the efficient and effective operation of our business, particularly Mr. Amir Reichman, our Chief Executive Officer, and Mr. Elad Mark, our Chief Operating Officer. The early stage of our NanoAbs program creates uncertainty about our prospects and may make it more difficult to attract and retain qualified executives and other key personnel. Our limited financial resources may hinder the successful retention of our management and consulting team and adding additional experts, which could have a material adverse effect on our business, financial condition or results of operations.

***We are a developmental stage biopharmaceutical company with no product candidate(s) approved for marketing by regulatory agencies such as FDA, which makes it difficult to assess our future viability.***

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

● execute development activities;

● obtain required FDA and applicable foreign regulatory authorizations for the development and commercialization of current and future product candidates;

● maintain, leverage and expand our intellectual property portfolio;

● build and maintain robust manufacturing, sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners;

● gain market acceptance for our product candidate(s);

● develop and maintain any strategic relationships we elect to enter into; and

● manage our spending as costs and expenses increase due to drug discovery, preclinical development, clinical trials, regulatory approvals and commercialization.

If we are unsuccessful in accomplishing these objectives, we may not be able to develop any current and future product candidate(s), raise capital, expand our business or continue our operations.

***We face significant competition. If we cannot successfully compete with new or existing product candidate(s), our marketing and sales will suffer and we may never be profitable.***

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

● developing immuno-modulating products;

● undertaking preclinical testing and human clinical trials;

● obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals of drugs;

● formulating and manufacturing drugs; and

● launching, marketing and selling drugs.

Generally, our competitors currently include large fully integrated pharmaceutical companies as well as smaller biotech companies and academic research institutes attempting to develop antibodies directed at IL-17 as therapies or related therapies aimed at treating the same therapeutic areas, such as BMS, Novartis, Lilly, UCB, Moonlake, and others. If our competitors develop and commercialize products faster than we do or develop and commercialize products that are superior to our product candidate(s), our commercial opportunities will be reduced or eliminated. Our competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA and foreign regulatory authorities more rapidly than we do. Our competitors may also develop products or technologies that are superior to those we are developing and render our product candidate(s) obsolete or non-competitive. If we cannot successfully compete with new or existing product candidate(s), our marketing and sales will suffer and we may never be profitable.

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

● attract parties for acquisitions, joint ventures or other collaborations;

● license proprietary technology that is competitive with current and future product candidates;

● attract funding; and

● attract and hire scientific talent and other qualified personnel.

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

We could incur substantial costs and be required to limit commercialization in connection with product liability claims relating to current and future product candidates, which may result in substantial losses.

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

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

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

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

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

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

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

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

Our business will expose us to potential liability that results from risks associated with conducting clinical trials of current and future product candidates. A successful clinical trial liability claim, if any, brought against us could have a material adverse effect on our business, prospects, financial condition and results of operations even though clinical trial insurance is successfully maintained or obtained. The current and planned insurance coverages may only mitigate a small portion of a substantial claim against us.

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

***Disruptions in the financial markets and economic conditions could affect our ability to raise capital.***

In recent years, the U.S. and global economies suffered dramatic downturns as the result of a deterioration in the credit markets and related financial crises as well as a variety of other factors including, among other things, the COVID-19 pandemic, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. While the financial markets have improved, they are still somewhat unstable, and future disruptions or the return of adverse economic conditions may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at all.

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

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

***Governments may impose strict price controls, which may adversely affect our revenues, from the sale of product candidates.***

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

***Our internal computer systems, or those used by our contractors or consultants, may fail or experience security breaches or other unauthorized or improper access.***

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to privacy and information security incidents, such as data breaches, damage from computer viruses and unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-attacks or cyber-intrusions over the internet and attachments to emails. 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. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we will rely on third parties to conduct clinical trials for, and manufacture, current and future product candidates, and similar events relating to their computer systems could also have a material adverse effect on our business. Unauthorized disclosure of sensitive or confidential data, including personally identifiable information, whether through a breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, or unauthorized access to or through our information systems and networks, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation. Unauthorized disclosure of personally identifiable information could also expose us to sanctions for violations of data privacy laws and regulations around the world. To the extent that any disruption or security breach result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidate(s) could be delayed.

As we become more dependent on information technologies to conduct our operations, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, may increase in frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data and these risks apply both to us, and to third parties on whose systems we rely for the conduct of our business. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we and our partners may be unable to anticipate these techniques or to implement adequate preventative measures. Further, we do not have any control over the operations of the facilities or technology of our cloud and service providers, including any third party vendors that collect, process and store personal data on our behalf. Our systems, servers and platforms and those of our service providers may be vulnerable to computer viruses or physical or electronic break-ins that our or their security measures may not detect. Individuals able to circumvent such security measures may misappropriate our confidential or proprietary information, disrupt our operations, damage our computers or otherwise impair our reputation and business. We may need to expend significant resources and make significant capital investment to protect against security breaches or to mitigate the impact of any such breaches. There can be no assurance that we or our third party providers will be successful in preventing cyber-attacks or successfully mitigating their effects. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our current and future product candidate(s) could be delayed.

***Failure to comply with data protection, privacy and security laws and regulations could expose us to liability and adversely affect our business.***

We and our partners and third-party service providers may be subject to a variety of federal, state and foreign laws and regulations governing the collection, use, disclosure, storage and protection of personal information, including health-related data. These laws are complex, evolving and may differ significantly across jurisdictions.

In the United States, applicable laws may include, among others, federal and state privacy and data security laws, data breach notification laws and consumer protection laws enforced by the Federal Trade Commission and state authorities. In addition, certain state laws, such as the California Consumer Privacy Act (CCPA), provide individuals with enhanced rights regarding their personal information and impose additional compliance obligations on businesses. Outside the United States, we may be subject to data protection laws such as the European Union's General Data Protection Regulation (GDPR), which imposes strict requirements on the processing of personal data, including requirements relating to consent, data subject rights, data breach notifications and cross-border data transfers. Noncompliance with the GDPR and similar laws may result in significant fines and penalties. Compliance with these laws and regulations may require us to implement and maintain appropriate policies, procedures and technical safeguards, limit our ability to collect, use and disclose data, and incur significant costs. In addition, we may be required to enter into more restrictive contractual arrangements with third parties. We rely on internal personnel and external legal and regulatory advisors to assist in monitoring and managing compliance with applicable data protection and privacy laws. However, given the complexity and evolving nature of these laws, there can be no assurance that our compliance efforts will be sufficient or that we will be able to fully and timely adapt to new or changing requirements. Any failure by us or our partners and third-party service providers to comply with applicable data protection, privacy or security laws, or any unauthorized access to or disclosure of personal data, could result in government enforcement actions, fines, penalties, private litigation, reputational harm and disruption to our operations. Such events could adversely affect our business, financial condition and results of operations**.** Outside the United States, we may be subject to data protection laws such as the European Union's General Data Protection Regulation (GDPR), which imposes strict requirements on the processing of personal data. Compliance with these laws and regulations may require us to implement and maintain appropriate policies, procedures and technical safeguards, limit our ability to collect, use and disclose data, and incur significant costs. In addition, we may be required to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, and in some cases impact our ability to operate in certain jurisdictions. Any failure by us or our partners and third-party service providers to comply with applicable data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties, private litigation and/or adverse publicity and could negatively affect our operating results and business.

**Risks Related to Dependence on Third Parties**

***Our NanoAb development programs depend on exclusive license agreements with MPG and UMG, and the loss or limitation of these rights could materially adversely affect our business.***

We rely on exclusive license agreements with Max Planck Gesellschaft (MPG) and University Medical Center Göttingen (UMG) for core intellectual property underlying our NanoAb programs, including our IL-17 NanoAb candidates and other potential NanoAb targets. These agreements grant us rights to develop and commercialize products based on this intellectual property, subject to various financial, development and other obligations. Our rights under these license agreements are subject to conditions and may be terminated or modified by the licensors in certain circumstances, including if we fail to meet specified development milestones, such as the timely submission of regulatory filings, fail to comply with payment or other contractual obligations, or if the underlying licensed intellectual property is challenged, invalidated or otherwise limited. In addition, our license agreements may be subject to interpretation, and disputes may arise with MPG and/or UMG regarding the scope of our rights, performance obligations or other contractual terms. Any such dispute could result in delays, increased costs, or the loss or impairment of our licensed rights.

If our license rights are terminated, narrowed or otherwise adversely affected, we may lose the ability to develop or commercialize our NanoAb product candidates, which would have a material adverse effect on our business, financial condition and results of operations.

***We rely on MPG to create and provide additional support for our IL-17 NanoAbs program and any additional NanoAbs for our NanoAbs program, which are part of the Research Collaboration Agreement***

We rely on MPG to provide additional support for our IL-17 NanoAbs program and any additional NanoAbs which are part of our five year Research Collaboration Agreement with MPG and UMG. If the supply of NanoAbs is disrupted or delayed, we may not be able to complete at all or in a timely manner, the successful development and commercialization of our current or future product candidates. There is no guarantee that we will be successful in in in-licensing additional NanoAbs from MPG and UMG, or developing, and/or commercializing any of our NanoAbs

***If we were to conduct clinical trials, we would rely on third parties to conduct any such clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.***

We will rely on third parties such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct any future clinical trials on our behalf. Any of these third parties may terminate their engagement with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities.

Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. We remain responsible for ensuring that our clinical trial is conducted in accordance with the requirements of the relevant regulator, and failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Furthermore, third parties that we rely on for our clinical development activities may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any current and future product candidate(s). Our product development costs will increase if we experience delays in testing or obtaining marketing approvals.

***Disruptions to our CDMO manufacturing operations or third-party service providers could adversely affect both our CDMO business and our product development activities.***

We conduct our manufacturing activities primarily through our CDMO infrastructure, including our facilities in Jerusalem and Yavne, Israel. These facilities support our CDMO services as well as certain development activities for our NanoAb programs. In addition, we rely on third-party contract research organizations (CROs) and contract manufacturing organizations (CMOs) for capabilities that we do not have in-house, including technologies such as mammalian cell-based development and manufacturing.

Our manufacturing operations and development activities depend on specialized equipment, materials and complex processes that would be difficult, time-consuming and costly to replicate. We do not have redundant manufacturing capabilities, and any disruption to our facilities or those of our third-party providers could delay or interrupt both our CDMO services and our product development programs. Such disruptions may result from equipment failure, contamination, regulatory non-compliance, supply chain interruptions or other unforeseen events. In addition, failure to maintain compliance with applicable current Good Manufacturing Practice (cGMP) requirements or other regulatory standards at our facilities or at third-party providers could result in regulatory actions, including suspension of operations.

If our facilities or third-party providers are unable to operate effectively or meet our requirements, we may be unable to provide CDMO services to our customers or to advance our internal programs in a timely manner, if at all. Transitioning to alternative providers may not be feasible on acceptable timelines or terms. Any such disruptions could result in delays, increased costs, loss of customers or impairment of our development programs, and could materially adversely affect our business, financial condition and results of operations.

***Use of third parties to manufacture current and future product candidate(s) may increase the risk that we will not have sufficient quantities of such product candidate(s) at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.***

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Our GMP biologics manufacturing facility in Jerusalem and our cGMP manufacturing facility in Yavne, Israel are capable of manufacturing an annual supply of current and future product candidate(s) suitable for regulatory or other similar uses. However, we may also rely on a third party CMO for commercial supply of current and future product candidates.

Reliance on a third party CMO entails risks, including:

● Reliance on third party for regulatory compliance and quality assurance;

● The possible breach of the manufacturing agreement by the third party;

● The possible failure to manufacture sufficient quantities of current and future product candidates due to reasons outside of the reasonable control of the third party;

● The possible misappropriation of our proprietary information, including our know-how; and

● The possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

A CMO may not be able to comply with cGMP regulations or similar regulatory requirements outside of the U.S. Our failure, or the failure of our third-party manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidate(s), operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidate(s).

***We may not obtain the necessary materials for the performance of any future clinical trials in the U.S. or other countries around the world that we may conduct.***

Clinical trials we may conduct in the future may involve obtaining materials and information that may not currently be in our possession and that we rely on suppliers and manufacturers to provide. It is possible that the FDA or any other relevant regulatory body will request that we provide materials or information that are not in our possession at that time before allowing us to proceed with any proposed clinical trials.

**Risks Related to Our Intellectual Property**

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

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

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

● the degree and range of protection any patents will afford us against competitors;

● the patents concerning our business activities were not registered in all countries and therefore our patent protection may be lacking in some territories;

● if and when patents will be issued;

● whether or not others will obtain patents claiming aspects similar to those covered by our own or licensed patents and patent applications;

● we may be subject to interference proceedings;

● we may be subject to opposition or post-grant proceedings in foreign countries;

● any patents that are issued may not provide meaningful protection;

● we may not be able to develop additional proprietary technologies that are patentable;

● other companies may challenge patents licensed or issued to us or our customers;

● other companies may independently develop similar or alternative technologies, or duplicate our technologies;

● other companies may design around technologies we have licensed or developed;

● enforcement of patents is complex, uncertain and expensive; and

● we may need to initiate litigation or administrative proceedings that may be costly whether we win or lose.

If patent rights covering our product candidate(s) and methods are not sufficiently broad, they may not provide us with any protection against competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office (the "USPTO") or any foreign patent office issue patents to us or our licensors, others may challenge the patents or design around the patents, or the patent office or the courts may invalidate the patents. An adverse determination in any opposition, derivation, revocation, re-examination, post-grant and inter parties review or interference proceedings or foreign equivalent, or litigation, challenging our patent rights or the patent rights of others could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Such proceedings and any other patent challenges may result in loss of patent rights, loss of exclusivity, loss of priority or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and product candidate(s). Thus, any patents we own or license from or to third parties may not provide any protection against our competitors. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Moreover, there could be public announcements of the results of hearings, motions or other developments related to any of the foregoing proceedings. If securities analysts or investors perceive those results to be negative, it could cause the price of the ADSs to decline. Any of the foregoing could harm our business, results of operations and financial condition.

We cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any of our issued patents or patents licensed from MPG (or any other third-party in the future) will give us adequate protection from competing products. Further, even if our owned or licensed patent applications issue as patents, the issuance of any such patents is not conclusive as to their inventorship, scope, validity or enforceability and such patents may be challenged, invalidated, narrowed or held to be unenforceable.

We may be subject to a third-party pre-issuance submission of prior art to the USPTO or equivalent foreign bodies. In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions.

Moreover, some of our owned or in-licensed patents and patent applications may in the future be co-owned with third parties. If we are unable to obtain an exclusive license to any such co-owners' interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, who could market competing products and technology. In addition, we may need the cooperation of any such co-owners in order to enforce such patents against third parties, and such cooperation may not be provided to us.

It is also possible that others may obtain issued patents that could prevent us from commercializing our product candidate(s) or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. If we are unable to license such technology, or if we are forced to license such technology, on unfavorable terms, our business could be materially harmed and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.

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

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

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

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

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

The cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved in our favor, could be substantial and could divert management's resources and attention. Competitors and other third parties may infringe, misappropriate or otherwise violate our issued patents or other intellectual property or the patents or other intellectual property of our licensors. Our ability to enforce our patent protection could be limited by our financial resources, and may be subject to lengthy delays. In addition, our patents or the patents of our licensors may become involved in inventorship or priority disputes. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents or that our patents are invalid or unenforceable. In a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent's claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology. An adverse result in any litigation proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable or interpreted narrowly. We may find it impractical or undesirable to enforce our intellectual property against some third parties.

A third party may claim that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research, development and the sale of any current and future product candidate(s). Such lawsuits are expensive and would consume time and other resources. There is a risk that a court will decide that we are infringing the third party's patents and will order us to cease the activities claimed by the patents, including to cease commercializing the infringing technology or product candidate(s), redesign our product candidate(s) or processes to avoid infringement, which may be impossible or require substantial time and monetary expenditure, or obtain licenses (which may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay the other party damages for having infringed their patents.

There is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. 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 and other fees. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our product candidate(s), technologies or other matters. Any claims of infringement asserted against us, whether or not successful, may have a material adverse effect on us. Any of the foregoing events would harm our business, financial condition, results of operations and prospects.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims could result in substantial costs and diversion of management resources, which could harm our business. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs or in-license needed technology or other product candidate(s). There could also be public announcements of the results of the hearing, motions or other interim proceedings or developments. If securities analysts or investors perceive those results to be negative, it could cause the price of the ADSs to decline. Any of the foregoing events could harm our business, financial condition, results of operations and prospects.

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

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek to enter into these types of agreements with our contractors, consultants, advisors and research and other partners, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with current and future product candidates. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. We cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. Despite the protective measures we employ, we still face the risk that:

● these agreements may be breached;

● these agreements may not provide adequate remedies for the applicable type of breach;

● our proprietary know-how will otherwise become known; or

● our competitors will independently develop similar technology or proprietary information.

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

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

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

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

● others may be able to make compounds that are the same as or similar to current and future product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;

● we or our licensors or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

● we or our licensors or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;

● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

● it is possible that our pending patent applications will not lead to issued patents;

● issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

● our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

● we may not develop additional proprietary technologies that are patentable; and

● the patents of others may have an adverse effect on our business.

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

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

***We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.***

A significant portion of our intellectual property has been and may in the future be developed by our employees in the course of their employment for us. Under the Israeli Patents Law, 5727-1967 (the "Patents Law"), inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as "service inventions," which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patents Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee (the "Committee"), a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his inventions. Decisions by the Committee have created uncertainty in this area, as it held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights. However, a later decision by the Committee held that such right can be waived by the employee. The Committee further held that an explicit reference to the waived right is not necessary in every circumstance in order for the employee's waiver of such right to be valid. Such waiver can be formalized in writing or orally or be implied by the actions of the parties in accordance with the rules of interpretation of Israeli contract law. We generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service invention rights, we may face claims demanding remuneration in consideration for assigned inventions.

***We may receive less revenue from any current and future product candidate(s) if any of our employees successfully claim for compensation for their work in developing our intellectual property, which in turn could impact our future profitability.***

Our employees may have been previously employed at other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants and advisors 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 these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual's former employer. Litigation may be necessary to defend against these claims. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs, delay development of our product candidate(s) and be a distraction to management. Any of the foregoing events would harm our business, prospects and results of operations.

***The terms and scope of our patents may be insufficient to protect our product candidates for an adequate period of time, which could allow earlier competition than anticipated..***

Patents have a limited lifespan. In most jurisdictions, including the United States, the natural expiration of a patent is generally 20 years from its earliest non-provisional filing date, subject to the payment of maintenance fees. Given the time required for the development, testing and regulatory review of our product candidates, any patents protecting such product candidates may expire before or shortly after commercialization, if at all.

Although certain extensions of patent term may be available, including under the Drug Price Competition and Patent Term Restoration Act of 1984 in the United States and through Supplementary Protection Certificates (SPCs) in the European Union, such extensions are limited in duration, subject to strict eligibility criteria, and may not be granted. In the United States, patent term extensions are limited to a maximum of five years, cannot extend the total patent term beyond 14 years from the date of regulatory approval, and may be granted for only a single patent per approved product. There can be no assurance that we will be able to obtain such extensions, or that any extension granted will be sufficient to protect our commercial interests.

In addition, to the extent our product candidates are regulated as biologics, they may be eligible for a period of regulatory exclusivity under the Biologics Price Competition and Innovation Act of 2009. However, such exclusivity is limited in duration, is separate from patent protection, and may be subject to change as a result of legislative, regulatory or policy developments.

Furthermore, the strength and breadth of our patent portfolio may be insufficient to prevent competitors from developing and commercializing products that are similar to or compete with our product candidates, including through alternative technologies or design-around strategies. If we are unable to maintain adequate patent protection or other forms of exclusivity, our competitors may be able to enter the market earlier than expected, which could adversely affect our competitive position, business, financial condition and results of operations.

**Risks Related to Our Operations in Israel**

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***Our operations are located primarily in Israel, and geopolitical, security and economic conditions in the region may adversely affect our business.***

We are incorporated in Israel and conduct substantially all of our operations, including our CDMO manufacturing activities, in Israel. As a result, our business is directly affected by economic, political, geopolitical and military conditions in the region.

Israel has experienced ongoing armed conflicts, terrorist activity and geopolitical tensions involving neighboring countries and other regional actors. In October 2023, Hamas terrorists infiltrated Israel's southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel's border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel's security cabinet declared war against Hamas and later against Hezbollah in Lebanon. Hostilities subsequently escalated between Israel and a number of its other neighbors, including conflicts with Hezbollah along Israel's northern border with Lebanon, with Iran (including a war during June 2025) and with the Houthi movement in Yemen, which both launched drone and missile attacks on military and civilian targets within Israel. In addition, the Houthi movement disrupted international commerce by launching a number of attacks on commercial vessels traversing the Gulf of Aden and the Red Sea. While a ceasefire between Israel and Lebanon (with respect to Hezbollah) was announced in November 2024, a ceasefire between Israel and Iran was announced in June 2025 and the latest ceasefire between Israel and Hamas was announced in October 2025, in February 2026, hostilities between Israel and Iran escalated again. In late February 2026, the United States, together with Israel, launched a major joint military campaign of air and missile strikes against targets in Iran, which triggered a broad Iranian response and contributed to significant regional instability, including, in early March 2026, resumed conflicts with Hezbollah. The security situation in the region remains highly fluid, and we are unable to predict if, when, or on what terms, this escalation will be resolved. A military campaign against this terrorist organization commenced in parallel to its continued rocket and terror attacks. Moreover, there were clashes between Israel and Hezbollah in Lebanon, including limited ground operations by Israel against Hezbollah in Lebanon. Additionally, Israel and Iran traded their first ever direct attacks, as well as proxy and covert actions, throughout 2024, and Yemeni rebel group, the Houthis, have launched attacks on Israel and on global shipping routes in the Red Sea, causing disruptions of supply chain. Some, or all of these hostilities may escalate in the future into more violent events which may adversely affect our ability to continue carrying out various administrative, research, operational and commercial functions and activities both in Israel and globally. Any escalation of hostilities, including military conflicts, missile attacks, or other security incidents, could disrupt our operations, damage infrastructure, limit access to our facilities, or otherwise adversely affect business conditions.

Such events may also impact our workforce. Many of our employees reside in Israel and may be subject to military reserve duty, which could result in reduced workforce availability and disruptions to our operations. In addition, travel restrictions, security concerns or government-imposed limitations on movement may impair our ability to conduct business activities, including interactions with customers, partners and suppliers. Our operations and those of our suppliers and customers may also be affected by disruptions to infrastructure, logistics or supply chains, which could impair our ability to manufacture products or deliver CDMO services.

Geopolitical instability may also adversely affect global financial markets and investor sentiment toward Israeli companies, which could impact our ability to raise capital on favorable terms, if at all.

In addition, political developments within Israel, including potential changes to governmental or judicial structures, as well as international trade restrictions, boycotts or other measures directed at Israel or Israeli companies, could adversely affect our business, financial condition and results of operations.

The security and political situation in the region is unpredictable and may deteriorate in the future. Any such developments could materially adversely affect our business, financial condition and results of operations

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

We are incorporated in Israel. Most of our current executive officers and directors reside in Israel and most of our assets reside outside of the United States. Therefore, a judgment obtained against us or any of these persons in the United States, including one 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 unless certain provisions of Israeli law are satisfied. It may also be difficult 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.

Under Israeli law, if U.S. law is found to be applicable to such a claim, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would be governed by Israeli law. There is little binding case law in Israel addressing these matters.

***Under applicable U.S. and Israeli law, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective of their agreements with us, which in turn could impact our future profitability.***

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

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

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

***Changes in Israeli tax laws and examinations by the Israeli Tax Authorities could increase our overall tax liabilities.***

We are subject to various taxes and tax compliance obligations in Israel. Changes in Israeli tax laws and regulations or their implementation in the future could increase our tax liabilities and our tax compliance obligations. In addition, the proper application of Israeli tax laws is subject to certain uncertainties and require the exercise of judgement. We may be subject to examinations by the Israeli Tax Authorities, and if our application or interpretation of Israeli tax laws is successfully challenged, we could be subject to additional tax liabilities, including interest and penalties, which could adversely affect our business and financial position.

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

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

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

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

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

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

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

**Risks Related to our Securities**

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***Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs. The delisting could adversely affect the market liquidity of our shares and the market price of our shares could decrease significantly.***

If we fail to satisfy Nasdaq's continued listing requirements, Nasdaq may take steps to delist the ADSs.

On March 12, 2026, we received a notice of non-compliance from Nasdaq that we are not in compliance with the requirement to maintain a minimum bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the "Minimum Price Rule"). We were given 180 days, or until September 8, 2026, to regain compliance.

Similarly, on November 1, 2023, we received a notice of non-compliance from Nasdaq that we are not in compliance with the Minimum Price Rule, and on April 30, 2024, we received a staff determination letter from Nasdaq notifying us that, due to our continued non-compliance with the Minimum Price Rule, the ADSs would be scheduled for delisting from Nasdaq and suspended for trading4 unless we timely request a hearing before an independent Nasdaq Hearings Panel (the "Hearing Panel"). We appealed this determination and requested a hearing before the Hearing Panel, which stayed the suspension. Our board of directors also approved a ratio change of the ADSs to our non-traded Ordinary Shares, increasing the number of Ordinary Shares represented by each ADS from 400 to 4,000, which was equivalent to a reverse split of 1 for 10. This action resulted in our compliance with the Minimum Price Rule.

In addition, we received notification letters from Nasdaq dated September 28, 2022 and May 1, 2023 advising us that we are not in compliance with Listing Rule 5550(b)(1) requiring companies listed on Nasdaq to maintain a minimum of $2,500,000 in stockholders' equity (the "Minimum Stockholders' Equity Rule") for continued listing. On August 1, 2023, we announced that Nasdaq reviewed our plan to regain compliance with the Minimum Stockholders' Equity Rule and provided us with an extension until October 30, 2023 to demonstrate compliance. On November 20, 2023, we announced the receipt of formal notification from Nasdaq that we had regained compliance with the Minimum Stockholders' Equity Rule. Nasdaq also indicated that if we do not evidence such compliance in our next periodic report (the Annual Report on Form 20-F), Nasdaq may provide notification to us that the ADSs may be subject to delisting, at which time we may appeal the determination to a Hearings Panel. Our shareholders' equity as of December 31, 2023, as reflected in our financial statements for the year ended December 31, 2023, was less than the minimum of $2,500,000 in stockholders' equity required by Nasdaq for continued listing.

As a result, on May 20, 2024, we received a staff determination letter from the Staff of Nasdaq that we are not in compliance with the Minimum Stockholders' Equity Rule. On June 18, 2024, a hearing was held before an independent Nasdaq Hearings Panel (the "Hearings Panel"), and we presented our views with respect to the stockholders' equity deficiency, including presenting a plan to address the Equity Requirement matter by converting a significant portion of the loan owed by us to the EIB into equity.

On August 29, 2024, following completion of the conversion of a significant portion of the loan owed by us to the EIB into preferred shares as described below, we announced that we had received formal notification from the Staff that we have regained compliance with the Equity Requirement.

In addition, on January 13, 2026, Nasdaq filed a proposed rule change with the SEC which would provide that a listed company's securities will be subject to immediate suspension and delisting if it has failed to maintain a value of at least $5 million in Market Value of Listed Securities (as defined in the Nasdaq rules) of its securities for a period of 30 consecutive business days, which is an additional ground for immediate suspension and delisting. The proposed rule change is currently under review by the SEC, with a final decision expected shortly. In the event that the proposed rule change is approved and becomes effective, if the market value of the ADSs falls below $5 million for a period of 30 consecutive business days, the trading in the ADSs would immediately have their trading suspended and be delisted, with no cure period or appeal available except to challenge errors in the initial suspension determination.

If the ADSs are delisted from Nasdaq, trading of our securities would most likely take place in an over-the-counter market for unlisted securities. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our securities in an over-the-counter market, and many investors would likely not buy or sell our securities due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our securities would be subject to SEC rules as a "penny stock," which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our securities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our securities, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition, and results of operations, including our ability to attract and retain qualified employees and raise capital.

A delisting from Nasdaq would likely have a negative effect on the price of the ADSs and would impair shareholders' ability to sell or purchase their ADSs when they wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow the ADSs to become listed again, stabilize the market price or improve the liquidity of the ADSs, prevent the ADSs from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq's listing requirements.

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

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

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

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

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***We may lose our foreign private issuer status which would then require us to comply with the Exchange Act's domestic reporting regime and cause us to incur significant legal, accounting and other expenses.***

We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. If in the future we are not a foreign private issuer as of the last day of the second fiscal quarter in any fiscal year, we would be required to comply with all of the periodic disclosure, current reporting requirements and proxy solicitation rules of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our Ordinary Shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our managing directors, supervisory directors and executive officers may not be United States citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. If we were to lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. These rules and regulations could also make it more difficult for us to attract and retain qualified managing directors and supervisory directors.

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

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

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

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

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

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

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***You may be subject to limitations on transfer of the ADSs.***

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

***General Risks***

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

We are a publicly traded company in the U.S. As a public company in the U.S., we incur additional significant accounting, legal and other expenses. We also incur costs associated with corporate governance requirements of the SEC and the NASDAQ Capital Market, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC and the NASDAQ Capital Market, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, if any, or as executive officers.

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***The market price for the ADSs has been and will likely remain volatile.***

The market price for the ADSs has been and is likely to remain highly volatile and subject to wide fluctuations in response to numerous factors including the following:

● our failure to obtain the authorizations necessary to commence future clinical trials;

● results of clinical and preclinical studies;

● announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

● announcements of technological innovations, new product candidate(s) or product enhancements by us or others;

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

● changes or developments in laws, regulations, or decisions applicable to our product candidate(s) or patents;

● any adverse changes to our relationship with manufacturers or suppliers;

● announcements concerning our competitors or the pharmaceutical or biotechnology industries in general;

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

● our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual property infringement actions;

● any major changes in our board of directors, management or other key personnel;

● legislation in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals;

● announcements by us of entering into or termination of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;

● expiration or terminations of licenses, research contracts or other collaboration agreements;

● public concern as to the safety of therapeutics we, our licensees or others develop;

● success of research and development projects;

● developments concerning intellectual property rights or regulatory approvals;

● variations in our and our competitors' results of operations;

● changes in earnings estimates or recommendations by securities analysts, if the ADSs are covered by these analysts;

● future issuances of Ordinary Shares, ADSs or other securities;

● general market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors, including factors unrelated to our operating performance; and

● the other factors described in this "Risk Factors" section.

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

Additionally, market prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities has from time to time, experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any one company. In the past, the COVID-19 pandemic resulted in significant financial market volatility and uncertainty. A resurgence of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of the ADSs.

In the past, securities class action litigation has often been brought against a company and its management following a decline in the market price of its securities. This risk is especially relevant for biopharmaceutical companies, which have experienced significant share price volatility in recent years.

In addition, the trading prices for securities of other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. The extent to which the outbreak may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

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

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

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

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

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

**Item 4.** **INFORMATION ON THE COMPANY**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **History and Development of the Company** 

**Our History**

Our legal and commercial name is Scinai Immunotherapeutics Ltd. We are a company limited by shares organized under the laws of Israel. We were incorporated in Israel in 2003 as a privately held company. In February 2007, we completed an initial public offering of our ordinary shares on the Tel Aviv Stock Exchange (TASE), and we voluntarily delisted from the TASE in January 2018. In May 2015 we completed an initial public offering of ADSs and ADSs warrants (which have since expired) on the Nasdaq Capital Market. On September 6, 2023, we announced the change of our corporate name to Scinai Immunotherapeutics Ltd. from BiondVax Pharmaceuticals Ltd. to reflect better our fresh start and new direction.

Our principal executive offices are located at Jerusalem BioPark, 2<sup>nd</sup> floor, Hadassah Ein Kerem Campus, Jerusalem, Israel, and our telephone number is +972-8-930-2529. Our website is www.scinai.com. The information we post on our website may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. However, the information contained on, or accessible through, our website is not incorporated by reference herein and shall not be considered part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, whose address is 850 Library Avenue, Suite 204, Newark, Delaware, and whose telephone number is (302) 738-6680.

Our capital expenditures for twelve months ended December 31, 2025 and December 31, 2024 amounted to approximately $24 and $12 thousand, respectively. These expenditures were primarily for factory leasehold improvements, computers and laboratory equipment.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Business Overview** 

We are a biopharmaceutical company with two complementary business units: (i) Scinai R&D, focused on the development of innovative therapeutics in inflammation and immunology, and (ii) our contract development and manufacturing organization (CDMO) business, which operates through our subsidiary, Scinai Biopharma Services Ltd.

Our R&D activities are centered around two pillars:

● PC111 Program – In 2025, we entered into an option agreement, as amended on September 11, 2025 and February 28, 2026, to acquire Pincell S.r.l., an Italian biotechnology company and the owner of PC111, a fully human monoclonal antibody targeting pathways involved in keratinocyte cell death and inflammation, with potential applications in severe dermatological conditions.

● NanoAbs Platform – We are developing a pipeline of novel therapeutics based on NanoAbs (VHH antibody fragments), which possess unique physicochemical properties and are suitable for advanced mono- and multi-specific antibody formats. Our NanoAbs activities are conducted in collaboration with the Max Planck Society ("MPG"), including the Max Planck Institute for Multidisciplinary Sciences ("MPI-MS"), and the University Medical Center Göttingen ("UMG") in Germany.

We continue to evaluate and in-license or acquire additional therapeutic assets aligned with our focus areas. In addition, we are currently evaluating the development strategy for our IL-17 program in light of scientific, technical and market considerations, including the evolving competitive landscape for IL-17-targeting therapies. As part of this process, we are assessing alternative approaches and prioritization of our R&D programs.

Our CDMO business provides integrated development and manufacturing services to small and emerging biotech companies, supporting clients from early-stage development through clinical-stage production. Following our acquisition of Recipharm Israel Ltd. on February 17, 2026 (subsequently renamed Scinai Biopharma Services Ltd.), we are in the process of consolidating our CDMO activities under this subsidiary, including the planned transfer of certain CDMO-related assets, operations and employees pursuant to Section 104 of the Israeli Income Tax Ordinance, subject to applicable approvals and implementation.

Under our license agreements with MPG and UMG, certain development milestones apply, including the submission of an Investigational New Drug (IND) application within specified timelines. We have requested extensions to the applicable IND submission deadlines in order to support modifications to our development strategy. There can be no assurance that such extensions will be granted or on what terms.

In addition, we are currently evaluating the development strategy for our IL-17 program in light of scientific, technical and market considerations, including the evolving competitive landscape for IL-17-targeting therapies. As part of this process, we are assessing alternative approaches and prioritization of our R&D programs.

**Development of I&I biological therapeutic products** 

**NanoAbs**

Since inception, we have conducted eight clinical trials, including a Phase 3 trial of our former lead product candidate, M-001, a universal influenza vaccine, which enrolled approximately 12,400 participants across seven countries. Following the Phase 3 results in the fourth quarter of 2020, which did not meet the primary clinical endpoints, the Company implemented a strategic turnaround. This process included raising additional capital, strengthening management (including the appointment of a new CEO), entering into a research collaboration agreement, and in-licensing new intellectual property from leading academic institutions. Since then, we have been developing a pipeline of diversified product candidates based on nanosized antibody fragments (NanoAbs), as well as, more recently, additional molecules that we may acquire, such as the antibody PC111.

NanoAbs are nanosized antibody fragments derived from camelid animals, also referred to as VHH antibodies or Nanobodies. "Nanobody" is a registered trademark of ABLYNX N.V., a wholly owned subsidiary of Sanofi. We have no affiliation with, and are not endorsed by, Sanofi. In parallel, we established our CDMO business unit to leverage our laboratory and manufacturing capabilities at our cGMP facility in Jerusalem.

As part of the turnaround, on December 22, 2021, we entered into a definitive exclusive, worldwide license agreement with the Max Planck Society ("MPG"), the parent organization of the Max Planck Institute for Multidisciplinary Sciences ("MPI"), and the University Medical Center Göttingen ("UMG"), for the development and commercialization of NanoAb-based therapeutics targeting COVID-19. The agreement included upfront payments, development and commercial milestones, and royalties. In addition, we entered into a related research collaboration agreement to support development activities conducted by MPI and UMG. This collaboration included monthly payments and was intended to continue until the earlier of two years or the initiation of first-in-human clinical trials. Following our decision to pursue partnering opportunities for the COVID-19 program, we agreed with MPG and UMG to terminate this research collaboration.

On March 23, 2022, we entered into a five-year Research Collaboration Agreement (the "RCA") with MPG and UMG, covering the discovery, selection and characterization of NanoAbs directed against up to nine molecular targets across multiple indications, including plaque psoriasis, psoriatic arthritis, asthma and wet macular degeneration. These targets are clinically validated for antibody-based intervention, which we believe reduces discovery risk and may shorten development timelines. We believe that NanoAbs offer advantages such as strong binding affinity, thermal stability, and potential flexibility in routes of administration. Each NanoAb candidate is intended to represent a novel molecule, supported by patent filings, while collectively forming a pipeline based on a shared discovery, development and manufacturing platform. Under the RCA, we hold an exclusive option to enter into pre-negotiated worldwide license agreements for the development and commercialization of each NanoAb candidate.

On June 5, 2023, as part of this collaboration, we entered into an exclusive worldwide license agreement to develop and commercialize NanoAbs targeting Interleukin-17 (IL-17) across multiple potential indications, initially focusing on psoriasis and psoriatic arthritis. In June 2023, we also announced the cessation of active development of our COVID-19 NanoAb program, due to evolving viral variants, challenges in achieving broad-spectrum activity, and reduced market and funding interest. Any further development of this program would be subject to securing a strategic partner.

We are currently advancing our IL-17 NanoAb program with two product profiles in development, subject to ongoing evaluation of development strategy and positioning within the competitive landscape for IL-17-targeting therapies. The first is an intradermal IL-17A/F NanoAb designed for localized treatment of mild-to-moderate psoriasis, targeting patients with limited but clinically meaningful disease. This approach is intended to enable localized delivery with minimal systemic exposure and is supported by translational data. The second program is a bispecific IL-17A/F NanoAb combined with an additional target (VHH-Fc format), designed as a long-acting systemic therapy for moderate-to-severe inflammatory and immunology indications, including psoriasis, psoriatic arthritis, hidradenitis suppurativa (HS) and other related conditions. This approach is intended to leverage a multi-specific antibody design to enhance biological activity and extend half-life.

We submitted two separate applications under the European Funds for a Modern Economy (FENG) program, one for each program, on March 30 and March 31, 2026, each seeking approximately €12 million in grant funding to support drug development activities towards IND submission for the bispecific program and for IND enabling studies plus Phase 1/2a clinical trials for the intradermal program. Award decisions for both applications are expected in July 2026. There can be no assurance that either application will be approved or on what terms.

In addition, we have filed new patent applications for a NanoAb targeting IL-13 and, under the RCA, we hold an exclusive option to enter into a worldwide license agreement for its development and commercialization under pre-agreed financial terms. We have also filed patent applications for four additional NanoAbs arising from our collaboration with MPG and UMG and are evaluating the exercise of our exclusive licensing options for these candidates. Furthermore, we expect to apply for funding under the European Funds for a Modern Economy (FENG) program to support the development of a multi-specific antibody targeting TH2-related diseases, including asthma, atopic dermatitis and COPD.

**PC111**

On March 27, 2025, we announced that we had entered into a binding option agreement for the acquisition of the Italian biotech company Pincell S.r.l., the owner of PC111, a fully human monoclonal antibody in development for the treatment of pemphigus, Stevens-Johnson Syndrome (SJS) and toxic epidermal necrolysis (TEN). PC111 targets soluble Fas ligand (FasL) and is designed to inhibit apoptosis of keratinocytes, a pathway implicated in severe skin blistering disorders. Pursuant to the terms of the option agreement, we have the right to exercise, at our sole discretion, a full transfer of Pincell's shares, subject to the satisfaction of certain closing conditions. These conditions include receipt of Golden Power regulatory clearance by the Italian government and the fulfillment of specified funding requirements, consisting of either obtaining a grant award under the European Funds for a Modern Economy (FENG) program for our wholly owned Polish subsidiary or securing $3 million to fund the development of PC111. On June 5, 2025, we announced that the Italian government had granted Golden Power regulatory clearance. The remaining condition relates to the funding requirement. On September 18, 2025, we were notified that our initial application for a FENG grant was not selected for funding, and a subsequent appeal was rejected. We have submitted a revised application on March 30, 2026, incorporating feedback received during the prior review process. A decision on the revised application is expected in July 2026. If we do not satisfy the funding condition by August 31, 2026, we will not be able to exercise the option.

On September 11, 2025 and February 28, 2026, the parties entered into amendments to the option agreement extending the deadline for fulfillment of the option conditions to August 31, 2026 and the exercise of the option to September 30, 2026.

If the option is exercised and the acquisition is completed, Pincell's shareholders will be eligible for development milestone payments, sublicense-related payments based on the stage of development at the time of such sublicense, and royalties on future net sales of PC111 in the low single-digit range. In addition, Pincell's management team is expected to join a wholly owned subsidiary of the Company in Poland, and Pincell's founder, Prof. Carlo Pincelli, is expected to join the Company's Scientific Advisory Board.

Under the terms of the option agreement, if we or our affiliates do not file an Investigational New Drug (IND) application for PC111 with the FDA, or a comparable regulatory submission in another jurisdiction, by December 31, 2028, each seller will have the right to repurchase the shares it sold at the lower of (i) fair market value and (ii) the aggregate amount funded by us or our affiliates into Pincell (subject to a minimum equal to the nominal value of the shares).

PC111 is a fully human monoclonal antibody that binds to soluble Fas ligand (FasL), thereby blocking activation of apoptosis in keratinocytes. The Fas/FasL pathway has been implicated in multiple severe dermatological conditions. Unlike certain currently available therapies for inflammatory conditions, PC111 is not designed to broadly suppress the immune system. Pincell has developed a proprietary humanized FasL mouse model and has conducted in vitro, ex vivo and in vivo studies supporting the role of soluble FasL as a therapeutic target. In preclinical models of pemphigus, PC111 has been shown to inhibit blister formation without the use of steroids. In addition, preclinical data suggest that PC111 may modulate disease progression in SJS/TEN, including improvement of early-stage manifestations such as conjunctivitis and edema.

Pemphigus, SJS and TEN are rare but severe dermatological conditions associated with significant morbidity and mortality. Pemphigus is a chronic autoimmune blistering disease with an incidence of approximately 0.5 to 3.0 cases per 100,000 people annually and a prevalence of 15 to 30 per 100,000 people. The disease often requires long-term immunosuppressive treatment, has a substantial impact on quality of life and may be life-threatening without treatment. SJS and TEN are severe mucocutaneous reactions, typically triggered by medications, with an incidence of approximately one to six cases per million people annually for SJS and 0.4 to 1.2 cases per million for TEN. These conditions are characterized by widespread epidermal cell death and skin detachment. SJS has a mortality rate of up to 10%, while TEN has a mortality rate of 30–50%. Current treatments for pemphigus include corticosteroids, immunosuppressive agents and biologics such as rituximab. There are no approved therapies for SJS/TEN, and treatment is generally supportive, with the use of immunomodulatory agents in certain cases. These conditions represent areas of significant unmet medical need.

**CDMO Services**

On September 6, 2023, we announced the launch of a new business unit, Scinai Bioservices (now renamed Scinai Biopharma Services), focused on providing contract development and manufacturing services for early-stage biopharmaceutical programs. Our CDMO activities are primarily focused on analytical method development, process development, and cGMP manufacturing of clinical-stage materials, including aseptic processing and biologic drug substance development, with an emphasis on supporting early-stage biotechnology companies.

Since inception, our CDMO business has secured multiple customer engagements, including both research and GMP manufacturing projects, and has developed a growing pipeline of repeat and new clients, primarily from Israel and the United States. We continue to expand our commercial activities, with additional contracts under negotiation and increasing utilization of our development and manufacturing capabilities. As an early-stage business, the growth of our CDMO operations depends on our ability to secure additional customers, which is uncertain and may require additional funding to support operations during the scale-up phase.

Our CDMO services are supported by advanced laboratory infrastructure and a cGMP pilot manufacturing facility in Jerusalem, designed to meet EMA and FDA regulatory requirements. Our capabilities include upstream and downstream process development, process optimization and scale-up, cGMP manufacturing, fill and finish operations, analytical method development and GMP quality control, all supported by a comprehensive quality management system. Our manufacturing infrastructure incorporates modular, single-use technologies that provide operational flexibility, reduce changeover time and associated costs, and support efficient clinical manufacturing.

In December 2024, we established a U.S.-based subsidiary, Scinai Bioservices Inc., to support business development and client engagement in the U.S. market.

On February 17, 2026, we acquired 100% of the shares of Recipharm Israel Ltd. (subsequently renamed Scinai Biopharma Services Ltd.), which operates a cGMP manufacturing site in Yavne, Israel, and entered into a long-term strategic commercial collaboration with Recipharm. The Yavne site provides early chemistry development and small-scale manufacturing of active pharmaceutical ingredients (APIs), expanding our capabilities beyond biologics to include small-molecule development.

We currently operate our CDMO activities across two sites: our Jerusalem facility, comprising approximately 1,850 square meters (approximately 20,000 square feet), focused on early-stage development, analytics and biologics manufacturing, and the Yavne site, comprising approximately 660 square meters (approximately 7,100 square feet), which complements our capabilities with small-molecule development and manufacturing. Together, these facilities support an integrated CDMO platform spanning early development through clinical-stage manufacturing.

The acquisition of the Yavne site and the collaboration with Recipharm expand our manufacturing footprint, enhance our technical capabilities, and broaden our service offering to include both biologics and small-molecule programs. This expanded platform is intended to support a wider range of customer needs and increase our ability to attract and retain clients.

***Strategic Commercial Collaboration with Recipharm***

In connection with the acquisition, we and Recipharm entered into a Commercial Collaboration Agreement intended to support customer projects across multiple stages of the development lifecycle.

Under the collaboration framework:

● We act as a preferred partner within the Recipharm network for early-stage development and clinical manufacturing projects.

● Recipharm acts as one of our preferred partners for late-stage clinical and commercial manufacturing, subject to capacity and technical suitability

● We have access to Recipharm's global manufacturing network under predefined commercial terms, enabling us to support client programs that extend beyond our internal capabilities, including those of the Yavne site

● The parties may refer client projects to one another and share economics as programs transition between development stages

The collaboration is designed to enable clients that begin development programs with us at the early stage to transition, or "graduate," to Recipharm for late-stage clinical and commercial manufacturing, while allowing us to remain involved in the program and participate in its downstream economics.

As a result of the acquisition and the collaboration, our CDMO platform is intended to support a broader range of modalities, including recombinant proteins, antibodies, peptides, small molecules and oligonucleotides, through a combination of internal capabilities and access to Recipharm's network.

***Our Competitive Strengths***

We believe that our business is supported by a combination of strategic, scientific and operational capabilities that are intended to enable us to advance our pipeline while managing development risk and capital constraints.

● **Dual business model combining R&D and CDMO operations:** <br> We operate both a drug development business and a contract development and manufacturing (CDMO) platform. Our CDMO activities provide operational expertise in chemistry, manufacturing and controls (CMC), generate external revenues, and support our internal development programs. We believe this model provides a degree of financial and operational flexibility not typically available to early-stage biotechnology companies.

● **Capital-efficient development supported by non-dilutive funding:** <br> We have an established focus on advancing our programs through non-dilutive funding sources, including grant applications, which we believe supports capital-efficient development. This approach is intended to enable progression of our pipeline through key value inflection points while reducing reliance on equity financing and managing dilution.

● **Flagship development asset with potential regulatory and development advantages:** <br> We have access to externally sourced development assets with defined biological rationale and potential regulatory advantages, such as PC111, which has received orphan drug designation for pemphigus from the European Medicines Agency. We believe that such designation, together with the targeted indication and clinical development strategy, may provide opportunities for expedited regulatory pathways and potentially earlier commercialization relative to traditional development timelines, subject to regulatory approval and successful clinical development. These characteristics may enhance the attractiveness of such programs for potential partners.

● **Platform-based pipeline with multiple development options:** <br> Our NanoAb platform, developed through our collaboration with the Max Planck Society (MPG) and the University Medical Center Göttingen (UMG), provides access to multiple potential product candidates targeting clinically validated pathways. This approach is intended to support pipeline diversification and provide optionality across different therapeutic formats and indications.

● **Selective platform validation strategy:** <br> We are pursuing a focused approach to platform validation by prioritizing programs that we believe offer a more efficient path to proof-of-concept and partnering opportunities. This includes evaluating different product formats and development approaches in light of scientific, technical and commercial considerations.

● **Manufacturing and CMC capabilities supporting development and partnering:** <br> We operate cGMP manufacturing facilities in Jerusalem and Yavne, supporting biologics and small-molecule development and clinical manufacturing. These capabilities enable us to advance internal programs and support external clients and may enhance our credibility in business development and partnership discussions.

● **Strategic collaboration with Recipharm enabling lifecycle support:** <br> Through our collaboration with Recipharm, we are able to support customer programs from early-stage development through late-stage clinical and commercial manufacturing. This model is intended to allow programs initiated with us to transition to Recipharm as they advance, while enabling us to participate in downstream economics.

● **Experienced leadership with industry and operational expertise:** <br> Our management team and Board have experience across biotechnology, pharmaceuticals, manufacturing and corporate strategy, including prior roles at Novartis, GSK and Bristol Myers Squibb, as well as involvement in the founding and development of multiple biotechnology companies.

● **Business development and partnership orientation:** <br> We are actively pursuing partnerships and strategic transactions as part of our development model. We believe our combination of pipeline assets, platform technologies and manufacturing capabilities may support our ability to enter into such collaborations, although there can be no assurance that such efforts will be successful.

 ****

***Our Business Strategy***

Our strategy is to build a diversified and capital-efficient biotechnology business by combining selective pipeline development, non-dilutive funding, and an integrated CDMO platform. We aim to advance our programs through key value inflection points while managing development risk and capital requirements.

**R&D Business Strategy**

Our R&D strategy focuses on a combination of internally developed platform-based programs and externally sourced assets, with an emphasis on capital efficiency, risk management and optionality.

● **Advancing selected lead assets with defined development pathways:** <br> We prioritize assets that we believe have a clear biological rationale, potential regulatory advantages and the ability to reach meaningful clinical milestones within a reasonable timeframe. This includes externally sourced programs such as PC111, as well as selected internal programs.

● **Capital-efficient development through non-dilutive funding:** <br> We seek to advance our programs using non-dilutive funding sources, including grants, to support preclinical and early clinical development. This approach is intended to enable progression of multiple programs while reducing reliance on equity financing.

● **Platform-based pipeline with selective prioritization:** <br> Through our collaboration with the Max Planck Society (MPG) and the University Medical Center Göttingen (UMG), we have access to a pipeline of NanoAb-based candidates targeting clinically validated pathways. We selectively prioritize programs based on scientific, technical and commercial considerations, including development timelines, funding availability and partnering potential.

● **Focus on clinically validated targets and differentiated product profiles for NanoAb programs:** <br> For product candidates originating from our collaboration with the Max Planck Society (MPG) and the University Medical Center Göttingen (UMG), our development approach emphasizes targets that have already been clinically validated by existing therapies, which may reduce scientific risk and support more efficient development. We seek to develop differentiated product candidates through alternative formats, delivery approaches or positioning within existing therapeutic landscapes, while taking into account the competitive environment and evolving standards of care in each indication.

● **Selective advancement of externally sourced assets with differentiated regulatory and clinical pathways**: In parallel, we pursue externally sourced programs, such as PC111, that may address areas of high unmet medical need and offer potential regulatory advantages, including orphan drug designation. We believe such programs may provide opportunities for accelerated development pathways and differentiated clinical positioning, although their development involves distinct scientific and regulatory considerations.

● **Flexible asset sourcing strategy:** <br> In addition to internally generated programs, we actively evaluate opportunities to acquire or in-license therapeutic candidates, including assets that may offer a more advanced starting point or a defined development pathway.

● **Partnership-oriented development model:** <br> We intend to pursue strategic collaborations, out-licensing transactions and other partnership opportunities to support the development and commercialization of our programs. The timing and structure of such transactions will depend on the maturity of each program and market conditions

**CDMO Business Strategy**

Our CDMO strategy is to develop an integrated development and manufacturing platform that supports both external clients and our internal pipeline.

● **Focus on early-stage development and clinical manufacturing:** <br> We target early-stage biotechnology companies requiring analytical development, process development and cGMP manufacturing for clinical programs, where we believe there is demand for flexible and responsive service providers.

● **Leveraging CDMO operations to support R&D and reduce costs:** <br> Our CDMO activities enable us to utilize our manufacturing infrastructure, generate revenues, and support our internal programs, thereby helping to absorb fixed costs and reduce overall cash burn.

● **Expanding capabilities across modalities and manufacturing technologies:** <br> Through our facilities in Jerusalem and Yavne, we support both biologics and small-molecule development, enabling us to broaden our service offering and address a wider range of client needs.

● **Integration with Recipharm for lifecycle support:** <br> Through our collaboration with Recipharm, we are able to support programs from early-stage development through late-stage clinical and commercial manufacturing. This model is intended to allow client programs to transition from our platform to Recipharm as they advance, while enabling us to participate in downstream economics.

● **Scaling commercial activity and client base:** <br> We aim to expand our CDMO business through business development activities, repeat engagements and new client acquisition, although there can be no assurance that such efforts will result in sustained growth.

**Research and Development**

Our research and development activities focus on advancing a pipeline of antibody-based therapeutic candidates, including both internally developed NanoAb programs and externally sourced assets.

**PC111 Program**

PC111 is a fully human monoclonal antibody targeting soluble Fas ligand (FasL), which is implicated in keratinocyte apoptosis in severe dermatological conditions, including pemphigus, Stevens-Johnson Syndrome (SJS) and toxic epidermal necrolysis (TEN).

Preclinical studies conducted by Pincell have demonstrated activity of PC111 across in vitro, ex vivo and in vivo models. These studies include evidence of inhibition of keratinocyte apoptosis and reduction in blister formation in pemphigus models, as well as effects on disease-relevant markers in SJS/TEN models. In addition, pharmacokinetic and pharmacodynamic data have been generated in vivo.

Development of PC111 is subject to the exercise of our option to acquire Pincell, as described above. If the option is exercised, we intend to advance PC111 through further preclinical development and into clinical studies, subject to the availability of funding and other factors.

**IL-17 NanoAb Program**

We are developing NanoAb candidates targeting IL-17A and IL-17F for the treatment of inflammatory conditions, including psoriasis.

Preclinical studies, including ex vivo human skin models and in vivo studies, have demonstrated anti-inflammatory effects and reduction of disease-associated markers. In June 2024, we received scientific advice from the Paul Ehrlich Institute (PEI) supporting our proposed development pathway toward a Phase 1/2a clinical trial.

We continue to evaluate development approaches for this program, including formulation and delivery strategies, as well as its positioning within the broader therapeutic landscape for IL-17-targeting treatments. Further advancement of the program, including initiation of clinical studies, is expected to depend on securing funding, completion of required preclinical activities and ongoing strategic prioritization decisions.

**Additional NanoAb Programs**

Through our collaboration with the Max Planck Society (MPG) and the University Medical Center Göttingen (UMG), additional NanoAb candidates have been identified, including targets such as IL-13 and TSLP for inflammatory diseases.

We hold exclusive options to license these candidates under pre-agreed terms. We are evaluating these programs based on scientific, technical and commercial considerations, as well as available resources.

**COVID-19 NanoAb Program**

We have suspended active development of our COVID-19 NanoAb program due to changes in market conditions and are not currently pursuing further development unless a suitable partner is identified.

**Competition** 

Generally, our competitors include large, fully integrated pharmaceutical companies as well as companies and academic research institutes in various developmental stages attempting to develop (i) products for the prevention and treatment of disease targets that are the subject of our broader agreement with MPG and UMG, such as psoriasis, atopic dermatitis, asthma and AMD and (ii) the indications targeted by PC111. In addition, we face competition from large, fully integrated pharmaceutical companies that are already commercially selling products for the treatment of therapeutic indications that we aim to address. In the case of PC111, the current first-line treatment for Pemphigus, is systemic corticosteroids, and the current second-line treatment is Rituximab, sold under the brand name Rituxan<sup>®</sup>. In the case of Steven Johnson's Syndrome (SJS) and Toxic Epidermal Necrolysis (TEN), there is no approved treatment aside from hospitalization in an ICU or a burn unit with supportive care. To our knowledge, there are no molecules or targeted therapy currently in development for SJS/TEN.

**Marketing and Sales**

We do not currently have any pharmaceutical product marketing or sales capabilities. We intend to license to, or enter into strategic alliances, with third parties in the pharmaceutical business, which are equipped to market and/or sell any products that we acquire or develop in the future. We may seek to establish such capabilities internally in the future, if and when appropriate, in addition to any such licensing arrangements or strategic alliances.

For our CDMO business, we pursue targeted marketing activities, including online advertisements, direct outreach campaigns and participation in major pharmaceutical conferences at which we market our CDMO services and meet with prospective clients.

**Manufacturing**

We built, own, and operate a biologics manufacturing facility in Jerusalem, which is capable of manufacturing GMP-compliant product candidates for use in either clinical trials or for small to medium scale commercial supply. We have manufactured the COVID-19 and IL-17 NanoAbs for our preclinical in vivo studies in our facility, and although we currently anticipate using our facility for future manufacturing of product candidates, we may also rely on a third party CMO for commercial manufacturing. As part of our acquisition of Scinai Biopharma from Recipharm, we also acquired Scinai Biopharma's manufacturing capabilities at a facility in Yavne, Israel. Scinai Biopharma operates a cGMP manufacturing site, providing early chemistry development and small-scale manufacturing of active pharmaceutical ingredients (APIs) for biopharmaceutical customers' clinical programs.

**Properties**

***Facilities Leasing Agreements***

We conduct our operations across two primary facilities in Israel, located in Jerusalem and Yavne, which together support our integrated contract development and manufacturing (CDMO) platform.

We lease approximately 1,850 square meters (approximately 20,000 square feet) in the Jerusalem BioPark, located on the Ein Kerem Hadassah campus, adjacent to Hadassah University Hospital and the Hebrew University Medical School. The lease expires on December 31, 2032. The Jerusalem facility is focused on biologics development and clinical-stage manufacturing and includes laboratories, offices, and cGMP manufacturing suites. Capabilities at this site include upstream and downstream process development, process optimization and scale-up, cGMP manufacturing and limited aseptic fill and finish operations for clinical supply. The facility is supported by infrastructure designed to accommodate a range of biologics manufacturing processes and equipment and features modular, single-use systems that provide operational flexibility and enable adaptation to multiple manufacturing platforms, including recombinant proteins based products.

Our wholly owned subsidiary, Scinai Biopharma Services Ltd., leases approximately 660 square meters (approximately 7,100 square feet) in Yavne, Israel. The lease expires in August 2030. The Yavne facility is a cGMP development site focused on early-stage chemistry development and small-scale manufacturing of active pharmaceutical ingredients (APIs) for preclinical and clinical studies. It includes laboratories, offices, production rooms, analytical laboratories and a Class D cleanroom supporting cGMP operations. Capabilities at the site include medicinal chemistry, custom synthesis, route scouting and optimization, scale-up development, analytical method development and validation, stability studies, and small-batch cGMP manufacturing of APIs for toxicology and Phase 1/2 clinical trials. The facility operates in compliance with cGMP standards and supports customers across multiple countries.

Together, the Jerusalem and Yavne facilities provide complementary capabilities across biologics and small-molecule development, enabling us to support customer programs from early-stage development through clinical manufacturing. We believe that these facilities are adequate for our current needs and for the foreseeable future. We may seek to renew the leases upon expiration, subject to market conditions and agreement with the respective landlords, and may expand our facilities if required.

***Fixed Assets***

Our fixed assets are comprised of factory leasehold improvements, laboratory equipment, furniture, software and improvements in leased property. As of December 31, 2025, these assets relate to our Jerusalem facility. The accumulated depreciation as stated in our financial statements is deducted from the gross value of fixed assets.

Our fixed assets, net of accumulated depreciation, were $7.8 million as of December 31, 2025 and $9.2 million as of December 31, 2024.

***Laboratories and Manufacturing Infrastructure***

Our facilities in Jerusalem and Yavne include laboratories and manufacturing infrastructure supporting our research, development and CDMO activities. These facilities are equipped to support analytical testing, process development, and cGMP manufacturing for biologics and small-molecule programs.

Our Jerusalem site includes analytical and process development laboratories and cGMP manufacturing suites supporting upstream and downstream processing, formulation and aseptic fill and finish for clinical supply. Our Yavne site includes laboratories and production areas supporting medicinal chemistry, analytical services and small-scale cGMP manufacturing of active pharmaceutical ingredients (APIs) for preclinical and clinical programs. Both sites are supported by quality systems, controlled storage areas and infrastructure designed to meet applicable regulatory requirements.

**Research and other Grants**

***Finance Contract with European Investment Bank and Restructuring***

 

We borrowed 24 million Euro under a Finance Contract with the EIB, to finance a portion of the cost of developing our previous leading drug candidate M-001and building our GMP biologics manufacturing facility. As part of the Finance Contract, we also entered into a security agreement (the "Security Agreement"), whereby we created a first ranking floating charge in favor of EIB over substantially all of our assets (other than certain licensed intellectual property related to our former M-001 program).

On August 21, 2024, we announced that we had closed the Restructuring Agreement with the EIB, which included an amendment to the Finance Contract (the transactions contemplated by the Restructuring Agreement called the "EIB Restructuring Transaction"). In connection with the EIB Restructuring Transaction, an amount equal to approximately EUR 26.6 million (equal to approximately $27.9 million), including interest accrued to date, owed by us to the EIB under the Finance Contract was converted into 1,000 of our preferred shares, no par value per share. Following such conversion, the total outstanding amount owed by us to the EIB is EUR 250,000 (equal to approximately $260,000). The outstanding amount has a maturity date of December 31, 2031, is not prepayable in advance, and no interest accrues or is due and payable on such amount. The terms of the Preferred Shares are set forth in our Amended and Restated Articles of Association approved by our shareholders at the Extraordinary Meeting of Shareholders held August 12, 2024. See "Prospectus Summary – Recent Developments" above.

***Israeli Innovation Authority***

Since 2006, we have received approximately $6.2 million in grants to the Israeli Innovation Authority (IIA), formerly known as the Office of the Chief Scientist. The grants were for research and development of M-001. In light of the Phase 3 clinical trial results, we do not currently expect any future revenues from M-001 and therefore do not currently expect to make any royalty payments to the IIA. The Company is subject to various other restrictions pursuant to the grants, including limitations on transferring IP developed with grant funds. In light of the Company's new strategy, we do not expect these restrictions to be material to our ongoing operations.

In November 2023, we announced that the IIA had approved a non-dilutive grant, with effective date being September 1, 2023, covering 66% of the costs of an NIS 3.5 million (approximately $1.0 million) project aimed at ramping up our new CDMO business unit. The grant is neither subject to repayment nor tied to royalty payments of any kind. The grant covers approved expenses required for further developing Scinai's CDMO service for the 12 months from grant. IIA informed us that in August 2024 Scinai can apply for a grant extension covering 66% of additional NIS 1.5 million. In October 2025, we announced that we were awarded a grant of NIS 809,000 (about $246,000) from the IIA, which will fund approximately 66% of a NIS 1.23 million ($373,000) project aimed at acquiring and installing an advanced fill-and-finish system for sterile manufacturing. In February 2026, we announced that following an additional review by the IIA, the Company's project to advance a robotic aseptic fill & finish platform has been approved for expanded support. We are also exploring potential research grants from other potential governmental sources.

**Government Regulation**

***United States***

 

*FDA Regulations*

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

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

An IND application, while technically a request for a federal approval to transport or distribute a drug across state lines, is, in effect, a request for authorization from the FDA to administer an investigational drug product to humans. In the future, we may consider submitting an IND application to the FDA for initiating clinical trials or, if required, to conduct a bridging clinical study to allow licensure of a Company product candidate in the U.S.

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

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

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

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of a BLA as compared to an NDA for general traditional small molecule drugs requesting approval to market the product for one or more indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product's chemistry, manufacturing, and controls and proposed labeling, among other things. Given the complexities of manufacturing biological products that are processed from living material, BLA content must also demonstrate purity specifically in terms of showing that the final product does not contain extra material.

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

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

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

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

Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our CMOs or licensees that may disrupt production or distribution or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data may require changes to a product's approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA's policies may change, which could delay or prevent regulatory approval of any Company product candidates we may develop in the future.

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

***Expedited Development and Review Programs***

The FDA has a number of programs intended to expedite the development and review of product candidates. For example, Fast Track designation is intended to expedite or facilitate the process for reviewing new biological products that meet certain criteria. Specifically, new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new biological product may request the FDA to designate the biological product as a Fast Track product at any time during the clinical development of the product. Unique to a Fast Track product, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application. FDA may revoke the Fast Track designation if it believes that the designation is no longer supported by data emerging in the clinical trial process.

Under the Breakthrough Therapy program, products intended to treat a serious or life-threatening disease or condition may be eligible for Breakthrough Therapy designation, which includes eligibility for the benefits of the Fast Track program, when preliminary clinical evidence demonstrates that such product may have substantial improvement on one or more clinically significant endpoints over existing therapies. Additionally, FDA will seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design and conduct a development program as efficiently as possible.

A product is eligible for priority review if it is intended to treat a serious condition and, if approved or licensed, it would provide a significant improvement in safety or effectiveness. FDA intends to take action on a priority review marketing application within six months of receipt, compared to 10 months of receipt for regular review submissions.

Additionally, a product may be eligible for accelerated approval if it is intended to treat a serious or life-threatening disease or condition and would provide meaningful therapeutic benefit over existing treatments. Accelerated approval may be granted on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality and is reasonably likely to predict an effect on irreversible morbidity, mortality, or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a biological product receiving accelerated approval diligently perform adequate and well-controlled post marketing clinical studies demonstrating clinical benefit. In addition, the FDA requires as a condition for accelerated approval the submission of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, Breakthrough Therapy designation, priority review and accelerated approval do not change the standards for licensure but may expedite the review process.

***Pediatric Studies and Exclusivity***

Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the biological product 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. With enactment of the Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, sponsors must also submit pediatric study plans prior to the assessment data.

Those pediatric study plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA and the FDA's internal review committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

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 licensure of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.

Pediatric exclusivity is a type of non-patent marketing exclusivity in the U.S. and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity. This six-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA's request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application.

***FDA Review of BLAs***

After completion of the required clinical testing, a BLA is prepared and submitted to the FDA. FDA approval of the BLA is required before marketing of the product may begin in the U.S. The BLA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting a BLA is substantial. The submission of most BLAs is additionally subject to a substantial application user fee, currently exceeding $4,310,002 for fiscal year 2025, and the manufacturer and sponsor under an approved BLA are also subject to annual program fees, currently $403,889 for each prescription product. These fees are typically increased annually. Sponsors of applications for drugs granted Orphan Drug Designation are exempt from these user fees.

The FDA has 60 days from its receipt of a BLA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept a BLA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of BLAs to encourage timeliness. Applications for standard review drug products are meant to be reviewed within ten months; applications for priority review drugs are meant to be reviewed in six. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

The FDA is required to refer an application for a novel biological product to an advisory committee or explain why such referral was not made. An advisory committee is typically a panel that includes clinicians and other experts—for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.

Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not license the product unless compliance with cGMPs is satisfactory, and the application meets the appropriate standard. A BLA must include data that demonstrate that the biological product is safe, pure, and potent.

After the FDA evaluates the BLA and accompanying information and the manufacturing facilities, it issues either an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA's satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

An approval or licensure letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of BLA licensure, the FDA may require a REMS, to help ensure that the benefits of the biological product outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals and ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product licensure may require substantial post-approval testing and surveillance to monitor the drug's safety or efficacy. Once granted, product licenses may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

If the FDA approves a product, it may limit the approved indications for use for the product; require that contraindications, warnings or precautions be included in the product labeling; require that postmarketing studies, including Phase 4 clinical trials, be conducted to further assess the drug's safety after licensure; require testing and surveillance programs to monitor the product after commercialization; or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval, as applicable, of a new BLA or supplement before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing supplements as it does in reviewing BLAs.

***Biosimilars and Reference Product Exclusivity***

The BPCIA created an abbreviated approval pathway for biological product candidates shown to be highly similar, or "biosimilar," to or interchangeable with an FDA licensed reference biological product. Biosimilarity, which requires that a product is highly similar to the reference product notwithstanding minor differences in clinically inactive components, and that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can generally be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the interchangeable biosimilar and the reference biological product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product. A product shown to be biosimilar or interchangeable with an FDA-approved reference biological product may rely in part on the FDA's previous determination of safety and effectiveness for the reference product for approval, which can potentially reduce the cost and time required to obtain approval to market the product. Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles and have slowed implementation of the BPCIA by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of reference product exclusivity, another company may obtain FDA licensure and market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant's own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed "interchangeable" by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the U.S. As stated above, pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued "Written Request" for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, there has been discussion of whether Congress should reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate implementation of the BPCIA is subject to significant uncertainty.

***Post-Licensure FDA Requirements***

Biological products manufactured or distributed pursuant to FDA licenses are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion with the product. After licensure, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and licensure. There also are continuing annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

Often times, even after a biological product has been licensed by the FDA for sale, the FDA may require that certain post-licensure requirements be satisfied, including the conduct of additional clinical studies. If such post-approval requirements are not satisfied, the FDA may withdraw its licensure of the biological product. In addition, holders of a biological product license are required to report certain adverse reactions to the FDA, comply with certain requirements concerning advertising and promotional labeling for their products, and continue to have quality control and manufacturing procedures conform to cGMP after approval. In addition, biological product manufacturers and their subcontractors are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements and other aspects of regulatory compliance. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon 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.

Among the conditions for BLA licensure is the requirement that the manufacturing operations conform on an ongoing basis with cGMP. In complying with cGMP, we must expend time, money and effort in the areas of training, production and quality control within our own organization and at our contract manufacturing facilities. A successful inspection of the manufacturing facility by the FDA is usually a prerequisite for final licensure of a biological product. Following licensure of the BLA, we and our manufacturers will remain subject to periodic inspections by the FDA to assess continued compliance with cGMP requirements and the conditions of licensure. We will also face similar inspections coordinated by foreign regulatory authorities. The FDA periodically inspects the sponsor's records related to safety reporting and/or manufacturing facilities; this latter effort includes assessment of compliance with cGMP. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once licensure is granted, the FDA may withdraw licensure if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

● restrictions on the marketing or manufacturing of the product, including total or partial suspension of production, complete withdrawal of the product from the market or product recalls;

● fines, warning letters or holds on post-licensure clinical trials;

● refusal of the FDA to license pending BLAs or supplements, or suspension or revocation of product licensure;

● product seizure or detention, or refusal to permit the import or export of products;

● consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

● mandated modification of promotional materials and labeling and the issuance of corrective information;

● the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or

● injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates marketing, labeling, advertising and promotion of products that are placed on the market. Biological products may be promoted only for the licensed indications and in accordance with the provisions of the approved labeling. 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. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians 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. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer's communications on the subject of off-label use of their products.

In addition, the distribution of prescription drug products, including most biological products that require a prescription, is subject to the Prescription Drug Marketing Act, or the PDMA, which regulates the distribution of 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 drug product samples and impose requirements to ensure accountability in distribution.

*Other U.S. Healthcare Laws and Compliance Requirements*

Among others, the FDA, HHS, Office of Inspector General, the CMS and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the preclinical and clinical development, manufacture, marketing, and distribution of drugs such as those we are developing. These agencies and other federal, state, and local entities regulate, among other activities, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, sales, commercialization, marketing, advertising and promotion, distribution, post-approval monitoring and reporting, sampling, and export and import of our product candidates. Any drug candidates that we develop must be approved by the FDA before they may be legally marketed in the U.S. and by the appropriate foreign regulatory agency before they may be legally marketed in those foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the U.S., although there can be important differences. Additionally, some significant aspects of regulation in the EU are addressed in a centralized way, but country-specific regulation remains essential in many respects.

Although we do not currently have any products on the market, in addition to FDA restrictions on marketing of pharmaceutical products, we are also subject to healthcare statutory and regulatory requirements and enforcement by the U.S. federal and state governments. Pharmaceutical companies like us are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such regulation may constrain the financial arrangements and relationships through which we research, develop, and, ultimately, sell, market, and distribute any products for which we obtain marketing approval. Such laws include, without limitation:

● The federal Anti-Kickback Statute, an intent-based criminal statute that prohibits, among other activities, persons and entities from knowingly and willfully soliciting, offering, paying, receiving, or providing any remuneration (including any kickback, bride, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

● The federal civil and criminal false claims laws, including the civil FCA, which prohibit individuals or entities from, among other activities, knowingly presenting, or causing to be presented, to the federal government claims for payment or approval that are false, fictitious, or fraudulent; knowingly making, using, or causing to be made or used, a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. In addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. The FCA also permits a private individual acting as a "whistleblower" to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement.

● The federal civil monetary penalties laws, which prohibit, among other activities (1) arranging for or contracting with an individual or entity that is excluded from participation in federal healthcare programs to provide items or services reimbursable by a federal healthcare program, (2) failing to report and return a known overpayment, or (3) offering or transferring any remuneration to a Medicare or Medicaid beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of items or services reimbursable by Medicare or Medicaid, unless an exception applies.

● The federal criminal statutes enacted under HIPAA which impose criminal liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program; knowingly and willfully embezzling or stealing from a healthcare benefit program; willfully preventing, obstructing, misleading, or delaying a criminal investigation of a healthcare offense; and knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items, or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

● The federal Physician Payment Sunshine Act, enacted as part of the ACA, which imposes annual reporting requirements for certain manufacturers of drugs, devices, biological products, and medical supplies for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program, for certain payments and "transfers of value" provided to "covered recipients," which include U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members. For reports submitted to CMS on or after January 1, 2022, such obligations will include the reporting of payments and other transfers of value provided in the previous year to certain other healthcare professionals, including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives.

● Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply with respect to healthcare items or services reimbursed by non-governmental third party-payors and may be broader than their federal equivalents; state and foreign laws requiring pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and/or the relevant compliance guidance promulgated by the federal government or otherwise restricting payments that may be made to healthcare providers; state laws and regulations requiring drug manufacturer disclosures to state agencies and/or commercial purchasers with respect to certain price increases; state and foreign laws requiring drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and restricting marketing practices or requiring disclosure of marketing expenditures and pricing information; and state and local laws that requiring registration of pharmaceutical sales representatives.

We are also subject to the Foreign Corrupt Practices Act, or FCPA, which prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business.

Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, and others may be ineffective, and violations of the FCPA and similar state laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and results of operations.

Violations of any of these laws or any other applicable laws or regulations may result in significant penalties, including, without limitation, administrative, civil, and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations to resolve allegations of noncompliance, exclusion from participation in federal and state healthcare programs, such as Medicare and Medicaid, and imprisonment. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company's attention from its business.

 

*Coverage and Reimbursement*

Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a payor-by-payor basis. These third-party payors are increasingly reducing coverage and reimbursement for healthcare items (including drugs) and services. Moreover, for products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself may or may not be available. Instead, the hospital or administering physician may be reimbursed only for providing the treatment or procedure in which our product is used.

In addition, the U.S. government, states, and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of lower-cost or generic products. Adoption of price controls and cost-containment measures and adoption of more restrictive policies in jurisdictions with existing controls and measures could further limit sales of any drug product. Decreases in third-party reimbursement for any drug product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverse effect on sales.

Moreover, as a condition of participating in, and having products covered under, certain federal healthcare programs, such as Medicare and Medicaid, we may become subject to federal laws and regulations that require pharmaceutical manufacturers to calculate and report certain pricing metrics to the government, including the Average Manufacturer Price, or AMP, and Best Price under the MDRP, the Medicare Average Sales Price, the 340B Ceiling Price, and Non-Federal AMP reported to the Department of Veteran Affairs, and with respect to Medicaid, pay statutory rebates on utilization of manufacturers' products by Medicaid beneficiaries. Compliance with these laws and regulations will require significant resources and may have a material adverse effect on our revenues.

 

*Healthcare Reform*

In the U.S., in March 2010, the ACA was enacted, which substantially changed the way healthcare is financed by both governmental and private payors, and significantly affected the pharmaceutical industry. The ACA contained a number of provisions, including those governing the federal healthcare programs, provider reimbursement, and healthcare fraud and abuse laws. For example, the ACA:

● increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1% of the AMP;

● required collection of rebates for drugs paid by Medicaid managed care organizations;

● expanded beneficiary eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 138% of the federal poverty level, thereby potentially increasing manufacturers' Medicaid rebate liability;

● extended manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

● expanded the types of entities eligible for the 340B Drug Pricing Program;

● established a new methodology by which rebates owed by manufacturers under MDRP are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

● required manufacturers to participate in a coverage gap discount program, under which they must agree to offer 70 percent point-of-sale discounts off negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;

● imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell "branded prescription drugs" and biologic agents apportioned among these entities according to their market share in certain federal government programs;

● established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;

● created the Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

● required reporting of certain financial arrangements between manufacturers of drugs, biologics, devices, and medical supplies and physicians and teaching hospitals under the federal Physician Payments Sunshine Act; and

● required annual reporting of certain information regarding drug samples that manufacturers and distributors provide to licensed practitioners.

Since its enactment, there have been executive, judicial, and legislative branch challenges to certain aspects of the ACA, and, on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court's decision, President Biden had issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, policies that create barriers to obtaining access to health insurance coverage through the ACA marketplaces. It is unclear how healthcare reform measures enacted by Congress or implemented by the Biden administration or other efforts to challenge, repeal or replace the ACA, if any, will impact the ACA.

Other legislative changes have been proposed and adopted in the U.S. since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other changes, led to aggregate reductions in Medicare payments to providers of up to 2% per fiscal year that started in April 2013 and, due to subsequent legislation, will continue into 2031, with the exception of a temporary suspension of the payment reduction from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken. Effective January 1, 2024, manufacturers' MDRP rebate liability is no longer capped, meaning manufacturers may pay more in MDRP rebates than they receive on the sale of certain covered outpatient drugs. In the future, there may be additional challenges and/or amendments to the ACA.

The cost of prescription drugs has been the subject of considerable policy discussion and debate in the U.S. Congress has considered and passed legislation, and the former Trump administration pursued several regulatory reforms to further increase transparency around prices and price increases, lower out-of-pocket costs for consumers, and decrease spending on prescription drugs by government programs. Congress has also continued to conduct inquiries into the prescription drug industry's pricing practices. While several proposed reform measures will require Congress to pass legislation to become effective, Congress and the Biden administration have expressed support for legislative and/or administrative measures to address prescription drug costs. The Biden administration has also taken several executive actions that signal changes in policy from the prior administration, including with respect to executive actions by the Trump administration related to prescription drug costs. At the state level, legislatures are increasingly passing legislation and states are implementing regulations designed to control spending on, and patient out-of-pocket costs for, drug products.

We expect that additional state and federal healthcare reform and/or drug pricing measures will be adopted in the future, any of which could affect the pricing and/or availability of drug products, the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, and/or our ability to generate revenue, attain or maintain profitability, or commercialize products for which we may receive regulatory approval in the future.

 

*Other U.S. Healthcare Laws and Compliance Requirements*

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

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

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

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

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***Israel***

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

***Europe and Other Territories***

Before obtaining regulatory approval for a product, we must obtain authorization to conduct clinical trials. In the European Union, clinical trials are governed by the Clinical Trials Regulation (EU No. 536/2014), which became fully applicable on January 31, 2022. This regulation harmonizes the assessment and supervision of clinical trials across EU member states and allows for a single submission through the Clinical Trials Information System (CTIS) for trials conducted in multiple countries. Clinical trial applications must be approved by both the relevant national competent authority and an independent ethics committee prior to initiation.

To obtain marketing approval in the European Union, we may submit a marketing authorization application under the centralized procedure, which, if approved, results in a single authorization valid across all EU member states. The centralized procedure is mandatory for certain categories of products, including biologics and orphan medicinal products, and may be used for other innovative products. The standard evaluation timeline is up to 210 days, excluding clock stops, although accelerated assessment may be granted in certain cases where a product is considered to be of major public health interest. In addition, other regulatory pathways, such as decentralized or national procedures, may be available depending on the nature of the product and development strategy.

For countries outside the European Union, including in Eastern Europe, Latin America and Asia, regulatory requirements governing clinical trials, product approval, pricing and reimbursement vary by jurisdiction. In all cases, clinical trials must be conducted in accordance with Good Clinical Practice (GCP) and applicable regulatory and ethical standards.

Failure to comply with applicable regulatory requirements in any jurisdiction may result in sanctions, including fines, suspension or withdrawal of approvals, product recalls, operational restrictions or criminal penalties.

***Intellectual Property***

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Our intellectual property strategy is based on a combination of in-licensed rights, proprietary know-how and manufacturing expertise.

*PC111 Program*

Our lead clinical asset, PC111, is based on intellectual property licensed from third parties. These rights include patents and related know-how covering the development and commercialization of the product candidate. We hold exclusive rights under the applicable agreements to develop and commercialize PC111 in the licensed territories, subject to customary obligations such as milestone payments and royalties. The scope and duration of these rights are defined in the relevant license agreements and generally extend on a country-by-country basis for the life of the underlying patents and, in certain cases, for a period following first commercial sale.

*NanoAbs Platform*

We license the core intellectual property for our NanoAbs program from the Max Planck Society (MPG) under an exclusive license agreement. This agreement provides us with an exclusive, worldwide license to develop and commercialize NanoAbs based on certain patents and related intellectual property owned by MPG. Under the terms of the agreement, the license continues on a product-by-product and country-by-country basis until the later of (i) the expiration or abandonment of the relevant patent rights in such country and (ii) ten years from the date of first commercial sale of such product in such country. We also have the right to access additional nanobody targets under similar terms.

*Additional Know-How and Capabilities*

In addition to licensed intellectual property, we rely on proprietary know-how, trade secrets and accumulated expertise, particularly in biologics development and manufacturing. Our integrated capabilities, including process development and manufacturing at our facility, form an important component of our overall competitive position, especially in connection with our CDMO activities. We seek to protect our intellectual property through a combination of patents, contractual rights, confidentiality obligations and other measures, although there can be no assurance that such protections will be adequate or enforceable.

**Environmental Matters**

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

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Organizational Structure** 

Our wholly-owned subsidiary, Scinai BioServices Inc., was incorporated in Delaware on December 5, 2024 to serve as a CDMO contracting party for clients based in the United States. On March 24, 2025, we acquired a Polish company, Scinai Immunotherapeutics Spółka z ograniczoną odpowiedzialnością, as to serve as our wholly-owned subsidiary in Poland and as an applicant for potential grants under programs established by the Polish government. On February 16, 2026, we acquired Scinai Biopharma, our wholly-owned subsidiary incorporated in Israel. Scinai Biopharma operates a cGMP manufacturing site, providing early chemistry development and small-scale manufacturing of active pharmaceutical ingredients (APIs) for biopharmaceutical customers' clinical programs.

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Property, Plants and Equipment** 

Our principal executive offices and main laboratory are located at Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem Campus, Jerusalem, Israel, next to Hadassah University Hospitals and Hebrew University's Medical School. We lease there approximately 1,850 square meters (20,000 square feet), and the lease expires on December 31, 2032. Our wholly-owned subsidiary, Scinai Biopharma, also operates a laboratory in Yavne, Israel. We lease there approximately 660 square meters (7,100 square feet), and the lease expires on August 11, 2030, and provides for automatic extensions for two additional 60-month terms unless we provide three months' notice prior to the end of the then-current term.

For the year ended December 31, 2025, cash outflow for our office and laboratory leases amounted to $0.09 million.

Our fixed assets are comprised of factory leasehold improvements, laboratory equipment, furniture and software. The accumulated depreciation as stated in our financial reports is deducted from the fixed assets value. Our fixed assets, less deduction for the accumulated depreciation, were $7.8 million as of December 31, 2025 and $9.2 million as of December 31, 2024.

For a description of our current laboratory see Item 4B. "Business Overview – Properties".

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

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Not applicable.

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

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Operating Results** 

*The information contained in this section should be read in conjunction with our consolidated financial statements for the year ended December 31, 2025 and related notes and the information contained elsewhere in this annual report. Our financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP) as set forth in the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC).*

**Company Overview** 

We are a biopharmaceutical company with two complementary business units: (i) Scinai R&D, focused on the development of innovative therapeutics in inflammation and immunology, and (ii) our contract development and manufacturing organization (CDMO) business, which operates through our subsidiary, Scinai Biopharma Services Ltd.

Our R&D activities are centered around two pillars:

● PC111 Program – In 2025, we entered into an option agreement, as amended on September 11, 2025 and February 28, 2026, to acquire Pincell S.r.l., an Italian biotechnology company and the owner of PC111, a fully human monoclonal antibody targeting pathways involved in keratinocyte cell death and inflammation, with potential applications in severe dermatological conditions.

● NanoAbs Platform – We are developing a pipeline of novel therapeutics based on NanoAbs (VHH antibody fragments), which possess unique physicochemical properties and are suitable for advanced mono- and multi-specific antibody formats. Our NanoAbs activities are conducted in collaboration with the Max Planck Society (MPG), including the Max Planck Institute for Multidisciplinary Sciences (MPI-MS), and the University Medical Center Göttingen (UMG) in Germany.

We continue to evaluate and in-license or acquire additional therapeutic assets aligned with our focus areas. In addition, we are currently evaluating the development strategy for our IL-17 program in light of scientific, technical and market considerations, including the evolving competitive landscape for IL-17-targeting therapies. As part of this process, we are assessing alternative approaches and prioritization of our R&D programs.

Our CDMO business provides integrated development and manufacturing services to small and emerging biotech companies, supporting clients from early-stage development through clinical-stage production. Following our acquisition of Recipharm Israel Ltd. on February 17, 2026 (subsequently renamed Scinai Biopharma Services Ltd.), we are in the process of consolidating our CDMO activities under this subsidiary. This includes the planned transfer of certain CDMO-related assets, operations and employees to Scinai Biopharma Services Ltd. pursuant to Section 104 of the Israeli Income Tax Ordinance, subject to applicable approvals and implementation.

 

*Development of I&I biological therapeutic products* 

 

Since inception, we have executed eight clinical trials including a seven country, 12,400 participant phase 3 trial of its prior lead drug candidate, a universal influenza vaccine candidate ("M-001") and have built a GMP biologics manufacturing facility for biopharmaceutical products. After receiving the phase 3 trial results in Q3 2020, indicating that M-001 did not meet its clinical endpoints, we performed a turnaround process that included raising fresh capital, hiring new talent (including a new CEO), signing a research collaboration agreement with and in-licensing new intellectual property from world leading academic research institutes. Since then, we are in the process of developing a pipeline of diversified and commercially viable products built around the licensed innovative nanosized antibodies (NanoAb). NanoAbs are nanosized antibodies derived from camelid animals and are also known as VHH-antibodies or Nanobodies. "Nanobody" is a trademark registered by ABLYNX N.V., a wholly owned subsidiary of Sanofi. SCINAI has no affiliation with and is not endorsed by Sanofi.

As part of the abovementioned turnaround, on December 22, 2021, the Company signed a definitive exclusive, worldwide, License Agreement ("LA") with the Max Planck Society ("MPG"), the parent organization of the Max Planck Institute for Multidisciplinary Sciences ("MPI"), and the University Medical Center Göttingen ("UMG"), both in Gottingen, Germany, for the development and commercialization of innovative NanoAbs for the treatment of COVID-19. The agreement provides for an upfront payment, development and sales milestones and royalties based on sales and sharing of sublicense revenues. In addition, the Company signed an accompanying Research Collaboration Agreement ("aRCA") with MPG and UMG in support of the abovementioned development of a COVID-19 NanoAb by MPI and UMG. This collaboration included monthly payments and was intended to continue until the earlier of two years or the initiation of first-in-human clinical trials. Following our decision to pursue partnering opportunities for the COVID-19 program, we agreed with MPG and UMG to terminate this research collaboration.

On March 23, 2022, we signed a five-year Research Collaboration Agreement ("RCA"; collectively, with the LA and aRCA, the "MPG/UMG Agreements") with MPG and UMG covering the discovery, selection and characterization of NanoAbs for up to nine molecular targets across multiple indications, including plaque psoriasis, psoriatic arthritis, asthma and wet macular degeneration. These targets are clinically validated for antibody-based intervention, which we believe reduces discovery risk and may shorten development timelines. We believe that NanoAbs offer advantages such as strong binding affinity, thermal stability, and potential flexibility in routes of administration. Each NanoAb candidate is intended to represent a novel molecule, supported by patent filings, while collectively forming a pipeline based on a shared discovery, development and manufacturing platform. Under the RCA, we hold an exclusive option to enter into pre-negotiated worldwide license agreements for the development and commercialization of each NanoAb candidate.

On June 5, 2023, we announced that as part of our ongoing broad-based collaboration with the Max Planck Society and the University Medical Center Gottingen (UMG), we signed an exclusive worldwide license agreement to develop and commercialize VHH antibodies (NanoAbs) targeting Interleukin-17 (IL-17) as treatments for all potential indications, starting with psoriasis and psoriatic arthritis.

*CDMO services*

On September 6, 2023, we announced the launch of a new business unit named Scinai Bioservices now renamed Scinai Biopharma Services), focused on providing contract development and manufacturing services for early-stage biopharmaceutical programs. Our CDMO activities are primarily focused on analytical method development, process development, and cGMP manufacturing of clinical-stage materials, including aseptic processing and biologic drug substance development, with an emphasis on supporting early-stage biotechnology companies.

Our CDMO services are supported by advanced laboratory infrastructure and a cGMP pilot manufacturing facility in Jerusalem, designed to meet EMA and FDA regulatory requirements. Our capabilities include upstream and downstream process development, process optimization and scale-up, cGMP manufacturing, fill and finish operations, analytical method development and GMP quality control, all supported by a comprehensive quality management system. Our manufacturing infrastructure incorporates modular, single-use technologies that provide operational flexibility, reduce changeover time and associated costs, and support efficient clinical manufacturing.

On February 17, 2026, we acquired 100% of the shares of Recipharm Israel Ltd. (subsequently renamed Scinai Biopharma Services Ltd.), which operates a cGMP manufacturing site in Yavne, Israel, and entered into a long-term strategic commercial collaboration with Recipharm. The Yavne site provides early chemistry development and small-scale manufacturing of active pharmaceutical ingredients (APIs), expanding our capabilities beyond biologics to include small-molecule development.

The acquisition of the Yavne site and the collaboration with Recipharm expand our manufacturing footprint, enhance our technical capabilities, and broaden our service offering to include both biologics and small-molecule programs. This expanded platform is intended to support a wider range of customer needs and increase our ability to attract and retain clients.

**Key Components of Statements of Operations** 

***Revenues***

*Sources of revenues.* Since our inception, we have generated significant losses in connection with our research and development, clinical trials and general administrative expenses in support of our operations. We started to generate revenues only from 2024 from our CDMO business unit.

***Cost of Revenues***

Our Cost of Revenues consist primarily of salaries and related personnel expenses. These expenses represent the allocation of the cost of our manufacturing facilities, which are utilized to generate our CDMO revenues, over their estimated useful lives, and constitute a significant portion of our operational costs.

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***Operating Expenses***

Our operating expenses consist primarily of salary and related personnel expenses, Research Collaboration Agreement costs, depreciation and professional services.

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***Research and development expenses.***

 

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

We expect that a large percentage of our research and development expenses in the future will be incurred in support of our future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we will incur. Clinical development timelines, the probability of success and development costs can differ materially from expectations.

Our future research and development expenses will depend on any Company product candidate's commercial potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for any Company product candidate in certain indications in order to focus our resources on more promising product candidates. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

The lengthy process of completing clinical studies and seeking regulatory approval for any Company product candidate requires the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of the risk factors set forth above in "Risk Factors", we are not able to estimate with any certainty when we will recognize any net cash inflows from our projects.

Developing bio-pharmaceutical products, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. Our existing cash resources are not sufficient to fund our projected cash requirements at current monthly rates for at least the next 12 months, and we will require significant additional financing in the future to fund our operations, including if and when we conduct clinical trials, obtain regulatory approval and obtain commercial manufacturing capabilities for any Company product candidate and commercialize such product candidates. Our future capital requirements will depend on many factors, including:

● the progress and costs of our clinical trials and other research and development activities;

● the scope, prioritization and number of our clinical trials and other research and development programs;

● the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements with respect to our Company product candidates;

● the costs of the development and expansion of our operational infrastructure;

● the costs and timing of obtaining regulatory approvals for our Company product candidates;

● the ability of us, or our collaborators, to achieve development milestones, marketing approvals and other events or developments under our potential future licensing agreements;

● the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

● the costs and timing of building and securing manufacturing arrangements for clinical or commercial production;

● the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;

● the costs of acquiring or undertaking development and commercialization efforts for any Company product candidate or platforms;

● the magnitude of our general and administrative expenses; and

● any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our Company product candidates.

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds received from future private or public equity raising, grants from governmental agencies such as the IIA, debt or equity or other non-dilutive financings such as the loan from EIB, among other financing mechanisms. 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 any Company product candidate.

Since 2006, we received $6.2 million in IIA grants and Euro 24 million ($25.6 million) in EIB loans.

***Marketing, General and Administrative Expenses***

 

Our marketing, general and administrative expenses consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general and administrative staff. This group which includes employees in executive, operational, finance, and human resources roles. In addition, these expenses include consulting, legal, and other professional services related to general and administrative operations, business development, as well as costs associated with conferences and investor relations activities.

***Financial Income and Expenses***

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Financial income consists primarily of interest income on our cash and cash equivalents, foreign currency exchange income, income in respect of EIB loan and warrants valuation. Financial expenses consist primarily of expenses related to bank charges, foreign currency exchange, SEPA expenses and issuance costs.

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***Participation by Third Parties***

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

Research and development grants received from the IIA are recognized upon receipt as a liability if future economic benefits are expected from the project that will result in royalty-bearing sales. The amount of the liability for the grant is first measured at fair value using a discount rate that reflects a market rate of interest that reflects the appropriate degree of risks inherent in our business. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction of the related research and development expenses.

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

As a result of the failure of the Phase 3 clinical trial, the Company's management estimates that there will be no future revenues from M-001. Therefore, most likely, there will be no future royalty payments to the IIA.

The loan from the European Investment Bank ("EIB") was recorded in the Company's financial statements for the year ended December 31, 2024 as a liability in the amount of $0.3 million and as of December 31, 2023 as a liability in the amount of $19.4 million. On August 21, 2024, we announced that we had closed a Restructuring Agreement with EIB, which included an amendment to the amended Finance Contract with EIB. In connection with the EIB Restructuring Transaction, an amount equal to approximately EUR 26.6 million (equal to approximately $29 million), including interest accrued to date, owed by us to the EIB under the Finance Contract was converted into 1,000 of our preferred shares, no par value per share. Following such conversion, the total outstanding amount owed by us to the EIB is EUR 250,000 (equal to approximately $260,000). The outstanding amount has a maturity date of December 31, 2031, is not prepayable in advance, and no interest accrues or is due and payable on such amount.

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

***Taxes on Income***

Israeli resident companies, such as the Company, are generally subject to corporate tax at the rate of 23% as of 2025.

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

**Year Ended December 31, 2025 Compared to Year Ended December 31, 2024** 

***Revenues***

*Revenues.* Our revenues for the year ended December 31, 2025 were $1.3 million, compared to $0.7 million for the year ended December 31, 2024. The increase reflects continued expansion of our CDMO activities and growing customer engagement.

***Research and Development Expenses, net***

*Research and development expenses.* Our research and development expenses for the year ended December 31, 2025 amounted to $2.4 million, compared to $5.6 million for the year ended December 31, 2024. The decrease was primarily due to a decrease in the allocation of employees and facilities to the R&D business unit.

***Marketing, General and Administrative Expenses***

Our marketing, general and administrative expenses for the year ended December 31, 2025 amounted to $2.6 million, compared to $2.6 million for the year ended December 31, 2024.

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***Financial Income, Net***

Our financial income, net for the year ended December 31, 2025 amounted to $1million, primarily from exchange rate differences, SEPA commitment fees.

Our financial income, net for the year ended December 31, 2024 amounted to $13.5 million primarily from financial income from loan conversion of $14.8 million offset principally by exchange rate differences of approximately $1.5 million.

***Net Income (Loss)***

Our net loss for the year ended December 31, 2025 was $8.3 million, compared to our net income for the year ended December 31, 2024 of $4.8 million. The decrease was primarily due to financial income from loan conversion of $14.8 million recognized in 2024, which did not recur in 2025.

**Year Ended December 31, 2025 Compared to Year Ended December 31, 2024.**

See Item 5 of the Company's Annual Report on Form 20-F for the year ended December 31, 2024.

**Liquidity and Capital Resources** 

Since our inception, we have funded our operations primarily through public and private offerings of our equity securities in Israel and the U.S., grants from the IIA, grants received by the Israeli Ministry of Economy and European grants under the UNISEC consortium and the loan from the EIB. Information regarding the outstanding loan from the EIB is set forth above in "*Research and other Grants: Finance Contract - European Investment Bank."*

As of December 31, 2025, we had cash and cash equivalents and short-term deposits of $1.6 million as compared to $1.9 million as of December 31, 2024. Our cash and cash equivalents are denominated in U.S. dollars.

Net cash used in operating activities was $6.0 million for the year ended December 31, 2025, compared with net cash used in operating activities of $6.3 million for the year ended December 31, 2024.

Net cash used by investing activities for the year ended December 31, 2025 was $0.024 million, consisting primarily of purchase of property, plant and equipment compared with net cash used by investing activities of $0.012 million for the year ended December 31, 2024.

Net cash provided by financing activities for the year ended December 31, 2025 was $5.7 million, primarily from proceeds from issuance of ADSs under the Standby Equity Purchase Agreement with Yorkville Advisors compared to $3.4 million as of December 31, 2024.

Our current cash position is not sufficient to fund our planned operations for at least one year from the date of the issuance of our financial statements. Accordingly, there is substantial doubt about our ability to continue as a going concern. While we generate revenues from our CDMO activities, these revenues are not currently sufficient to fund our operations. Our ability to continue as a going concern is dependent on our ability to obtain additional financing, reduce costs and manage our liabilities as they become due. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all, particularly in light of current market conditions and our market capitalization.

We will require substantial additional financing not only to continue our operations but also to support the growth of our CDMO business and advance our therapeutic development programs. We expect to continue to incur significant operating and capital expenditures, including costs related to expanding our CDMO capabilities, research and development activities, manufacturing and regulatory compliance. If we are unable to obtain sufficient financing, we may be required to delay, limit, reduce or terminate certain of our activities, implement additional cost-saving measures, or cease operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty

The Company's financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The financial statements for the year ended December 31, 2025, do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company's ability to continue as a going concern.

In February 2021, we closed an underwritten offering in which we sold 24,712 ADSs at a public offering price of $495 per ADS resulting in gross proceeds of approximately $13.8 million.

In December 29, 2021, we closed an underwritten offering in which we sold 41,440 ADSs at a public offering price of $236 per ADS resulting in total proceeds of approximately $9.780 million.

On December 20, 2022, we closed an underwritten offering in which we sold 160,000 units and pre-funded units resulting in gross proceeds of $7.3 million and a net sum of $7.2 million after deduction of issuance expenses. Each unit consisted of one ADS and two warrants, , and each pre-funded unit consisted of one pre-funded warrant to purchase one ADS and two warrants. Each ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $50.00 per unit (or $49.99 per pre-funded unit after reducing $0.001 attributable to the exercise price of the pre-funded warrant). All the warrants have since expired. We received gross proceeds of $7.3 million and a net sum of $7.2 million after deduction of issuance expenses.

On September 19, 2023, we closed an offering in which we issued (i) in a registered direct offering, 40,000 ADSs and pre-funded warrants to purchase up to 74,655 ADSs, at an exercise price of $0.01 per ADS, at a purchase price of $11.6 per ADS and $11.59 per pre-funded warrant, and (ii) in a concurrent private placement, unregistered warrants to purchase up to 114,655 ADSs. The warrants have an exercise price of $11.6 per ADS and are exercisable for a period of five and one-half years from issuance. We received gross proceeds of approximately $1.33 million and a net sum of approximately $1.0 million after deduction of placement agent fees and issuance expenses.

On January 4, 2024, we closed an offering in which we issued new unregistered warrants to purchase up to 521,310 ADSs in consideration for the immediate exercise of certain outstanding warrants to purchase up to an aggregate of 260,655 ADSs, issued by us in September 2023 and December 2022, at a reduced exercise price of $6.50 per ADS. The new warrants have an exercise price of $6.50 per ADS and have a term of exercise equal to three years or five and one-half years, as applicable, based on the term of the exercised warrants, from the date of issuance. We received gross proceeds of approximately $1.69 million and a net sum of approximately $1.42 million, after deduction of underwriter discount and issuance expenses of $275.

On August 20, 2024, we announced that we had entered into a $2.0 million Investment Commitment Agreement with RK Stone Miami LLC ("RK Stone"), an affiliate of Mr. Daniel Stone, the largest shareholder of the Company. Pursuant to the agreement, we had the right to issue and sell ADSs to RK Stone, from time to time through December 31, 2024, for an aggregate purchase price of up to $2 million. Each such sale of ADSs was to be initiated (at the Company's discretion) by the Company providing an advance notice to RK Stone of the sale of ADSs in a minimum- amount of $200,000 and a maximum amount of $500,000, provided that we were not able to provide advance notices for an aggregate amount greater than $1.5 million prior to December 1, 2024. The price of the ADSs was to be calculated based on the lower of (i) the volume weighted average price (the "VWAP") of the daily VWAP of the ADSs for the ten trading days prior to the Company providing the advance notice or (ii) the VWAP of the daily VWAP of the ADSs for the three trading days following the delivery of the advance notice (provided the Company may impose a minimum market price for such three day period, and in the event the market price for such period is less than the minimum market price the Company has the right to rescind the advance notice and not issue the ADSs), in either case subject to a discount of 5%. Pursuant to the agreement, we issued 28,698 ADSs to RK Stone as a commitment fee. In addition, we issued pre-funded warrants to RK Stone to acquire an aggregate of 602,826 ADSs for an aggregate purchase price of $2.0 million, which was the entire amount we were able to raise under the agreement.

In June 2025, we raised $1.5 million in gross proceeds through drawdowns under the Standby Equity Purchase Agreement, dated as of March 3, 2025, with YA II PN, Ltd. and issued 511,690 ADSs. The funding was executed at a volume-weighted average price of approximately $2.90 per ADS. See "– March 2025 Standby Equity Purchase Agreement" below.

In July and August 2025, we raised $4.2 million in proceeds through drawdowns under such facility and issued 1,638,062 ADSs. The capital raising was executed at a volume-weighted average price of approximately $2.57 per ADS.

In February 2026, we were awarded a non-dilutive grant of approximately NIS 966,000 (about $310,000) from the Israel Innovation Authority (IIA). The grant will fund approximately 66% of a NIS 1.46 million ($468,000) project aimed at acquiring and installing an advanced fill-and-finish system, for sterile manufacturing.

We expect that we will incur additional losses as our CDMO Business Unit currently operates at a loss because revenue does not yet cover base operating expenses and related costs required to provide CDMO services. In parallel, we continue to advance our research and development programs, which require continued investment and are not supported by product revenue at this stage. As a result, we expect to continue to incur operating losses, and we may be required to obtain additional funds to additional funding to support CDMO scale-up to breakeven and to continue our research and development activities.

 

*March 2025 Standby Equity Purchase Agreement*

 

On March 3, 2025, we entered into a Standby Equity Purchase Agreement (the "March 2025 SEPA") with YA II PN, Ltd. ("YA"), pursuant to which YA has committed to purchase up to $10.0 million of ADSs, or the First Commitment Amount, at our direction from time to time, subject to the restrictions and satisfaction of the conditions in the March 2025 SEPA, during the period commencing on the date of execution of the March 2025 SEPA until the earlier of (i) the 36-month anniversary of the date of execution of the March 2025 SEPA, and (ii) YA's purchase of the total First Commitment Amount under the March 2025 SEPA, such period the First Commitment Period. Pursuant to the terms of the March 2025 SEPA, we issued 28,784 ADSs (the "Commitment Shares") to YA as consideration for its irrevocable commitment to purchase the Advance Shares under the March 2025 SEPA. We filed a registration statement on Form F-1 to register the resale of up to 3,022,796 ADSs issuable to YA under the March 2025 SEPA from time to time during the First Commitment Period (including the Commitment Shares), subject to the restrictions and satisfaction of the conditions in the March 2025 SEPA, if and when we determine to sell additional ADSs to YA under the March 2025 SEPA. YA has no right to require us to sell any ADSs to YA, but YA is obligated to make purchases of the ADSs as directed by us, subject to the restrictions and satisfaction of conditions set forth in the March 2025 SEPA upon receipt of a notice sent by us to YA setting forth the number of ADSs that we desire to issue and sell to YA, or an Advance Notice. The purchase price of the ADSs that we may direct YA to purchase from time to time under the March 2025 SEPA will be equal to 97% of the lowest daily volume weighted average price (VWAP) during the three consecutive trading day period commencing on the date that we deliver any Advance Notice to YA. We have the right to set a floor price in the Advance Notice that sets a lower limit of the ADS price at which we are willing to sell ADSs to YA. On March 24, 2025, we delivered an Advance Notice for 31,746 ADSs and thereafter delivered the ADSs, and on March 27, 2025, the Company received gross proceeds of approximately $104,000.

*September 2025 Standby Equity Purchase Agreement* 

On September 10, 2025, we entered into a Standby Equity Purchase Agreement (the "September 2025 SEPA") with YA. Pursuant to the September 2025 SEPA, we have the right, but not the obligation, to sell to YA from time to time during the 36 months following the execution of the September 2025 SEPA (each such occurrence, an "Advance") up to $15.0 million (the "Second Commitment Amount") of ADSs, subject to the restrictions and satisfaction of the conditions in the September 2025 SEPA. Pursuant to the terms of the September 2025 SEPA, any ADSs sold and issued by us to YA will be sold at a purchase price equal to 97% of the lowest of the three daily VWAPs of the ADSs during the three consecutive trading days commencing on the trading day of the Company's delivery of an Advance Notice to YA (the "Advance ADSs"). We may also specify a certain minimum acceptable price per ADS in each Advance. As consideration for YA's irrevocable commitment to purchase the ADSs up to the Second Commitment Amount, we agreed to pay a commitment fee of $108,000 (the "Commitment Fee") as follows: 50% on or about the date of execution of the September 2025 SEPA by the issuance by us to YA of 35,461 ADSs and (ii) 50% in cash on the earlier of (i) the date of the first issuance of Advance ADSs under the September 2025 SEPA (in which event the amount due may be paid from the cash proceeds of the first Advance) and (ii) 90 calendar days following the date on which the registration Statement registering the offer and sale by YA of the ADSs is declared effective by the SEC, which has occurred. Pursuant to the Purchase Agreement, YA is not obligated to purchase or acquire any ADSs under the September 2025 SEPA which, when aggregated with all other ADSs and Ordinary Shares beneficially owned by YA and its affiliates, would result in the beneficial ownership of YA and its affiliates (on an aggregated basis) to exceed 9.99% of the then-outstanding voting power or number of the Company's Ordinary Shares.

 

 

**Trend Information** 

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

**E. Critical Accounting Policies** 

The preparation of financial statements and the related notes thereto included elsewhere in this annual report in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company's management believes that the estimates, judgment 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 at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.

We believe that the following accounting policies involve a substantial degree of judgment and complexity, and accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. See also note 2 to our financial statements included elsewhere in this annual report.

*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 an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets through an impairment charge, to their estimated fair values. The majority of our fixed assets are concentrated in our CDMO facility in Jerusalem. Our ability to generate positive cashflows from such facility may impact the recoverability of such assets and may trigger future impairment to such facility. During the years ended December 31, 2025 and 2024, no impairment indicators were recognized.

*Fair value of financial instruments*

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

● Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

● Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.

● Level 3: Unobservable inputs are used when little or no market data are available.

The Company measures warrants liability at fair value classified within Level 3. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value (note 4)

The carrying amounts of cash and cash equivalents, restricted cash, trade receivables, prepaid expenses and other receivables, trade payables and other current payables approximate their fair value due to the short-term maturity of such instruments.

**Item 6.** **DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Directors and Senior Management** 

**Executive Officers and Directors**

We are managed by a board of directors, which is currently comprised of eight members, and our executive officers. Each of our executive officers is appointed by our board of directors. The table below sets forth our directors and executive officers. The business address for each of our executive officers and directors is c/o Scinai Immunotherapeutics Ltd., Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem Campus, Jerusalem, Israel.

---

| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Amir Reichman | 50 | Chief Executive Officer and Director |
| Uri Ben-Or | 55 | Chief Financial Officer |
| Elad Mark | 44 | Chief Operating Officer |
| Mark Germain | 75 | Chairman of the Board of Directors |
| Jay Green<sup>(1)</sup> | 54 | Director |
| Yael Margolin<sup>(1) (2)</sup> | 72 | Director |
| Samuel Moed <sup>(2)</sup> | 63 | Director |
| Adi Raviv<sup>(1) (2)</sup> | 70 | Director |

---

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

***Executive Officers***

**Mr. Amir Reichman** has served as Chief Executive Officer of the Company since 2021. As of March 31, 2026, Mr. Reichman also serves as Chief Executive Officer of the Company's subsidiary, Scinai Biopharma Services Ltd. Prior to joining the Company, Mr. Reichman served as Head of Global Vaccines Engineering Core Technologies and Asset Management at GSK Vaccines ("GSK") in Belgium from December 2017 to March 2021. Before that, he served as Senior Director of Vaccines Supply Chain at GSK from September 2015 to November 2017.

Prior to GSK, Mr. Reichman held various leadership roles of increasing responsibility within the Global Vaccines Value Chain Management organization of Novartis Vaccines and Diagnostics Ltd. ("Novartis") in Holly Springs, North Carolina from 2011 to 2015, prior to the acquisition of Novartis Vaccines by GSK. Mr. Reichman was also among the founding team of NeuroDerm Ltd. ("NeuroDerm"), an Israeli company focused on drug-device combination products for the treatment of Parkinson's disease, which was acquired by Mitsubishi Tanabe Pharma Corporation in 2017. He served as NeuroDerm's first employee and as a Senior Scientist until 2009. Mr. Reichman holds an M.Sc. in Biotechnology Engineering from Ben-Gurion University of the Negev and an MBA in Finance and Health Care Management from the Wharton School of the University of Pennsylvania.

**Mr. Uri Ben-Or,** CPA, MBA, has served as Chief Financial Officer of the Company since 2007. As of March 31, 2026, Mr. Ben-Or also serves as Chief Financial Officer of the Company's subsidiary, Scinai Biopharma Services Ltd. In January 2007, Mr. Ben-Or founded CFO Direct, through which he provides financial management services to the Company. Mr. Ben-Or has over 20 years of experience in corporate finance, accounting, mergers and acquisitions and public offerings, and has served as chief financial officer of multiple life sciences companies listed on the Tel Aviv Stock Exchange, Nasdaq and over-the-counter markets. Mr. Ben-Or holds a B.A. in Business from the College of Administration, an M.B.A. from Bar-Ilan University and is a certified public accountant in Israel.

**Mr. Elad Mark** joined the Company in 2018 as Site Head and served as Chief Operating Officer from September 2019. As of March 31, 2026, Mr. Mark serves as Chief Business Officer and Chief Technology Officer (CBO/CTO) of the Company's subsidiary, Scinai Biopharma Services Ltd., where he is responsible for business development, sales and marketing, program management, and cross-site engineering and technical functions across the CDMO platform. In this role, Mr. Mark focuses on commercial growth, client engagement and the integration of technical and operational capabilities across the subsidiary's manufacturing sites. Prior to joining the Company, Mr. Mark served for more than three years at Novartis as Technical Process Manager and Area Lead Process for the establishment of a large-scale biologics manufacturing facility in Singapore, a $800 million investment focused on drug substance manufacturing based on cell culture technology, supporting both clinical and commercial production of monoclonal antibodies for autoimmune, respiratory and oncology indications. Before that, Mr. Mark served as Head of the Engineering Department at Biopharmax Group, a company specializing in engineering, procurement, construction and management (EPCM) services for the pharmaceutical industry. Mr. Mark is a bioprocess engineer with over 15 years of experience across biotechnology engineering and manufacturing projects, including feasibility studies, conceptual and detailed design, commissioning, qualification and process validation. Mr. Mark holds a B.Sc. in Engineering from Afeka Academic College of Engineering in Tel Aviv and an MBA from the Open University of Israel.

***Directors***

**Mr. Mark Germain** joined the Board of Directors of the Company in 2018 and has served as Chairman of the Board since 2019. As of March 31, 2026, Mr. Germain also serves as Chairman of the Board of the Company's subsidiary, Scinai Biopharma Services Ltd. Mr. Germain has been involved as a founder, director, chairman and investor in over twenty biotechnology companies and has assisted many of them in arranging corporate partnerships, acquiring technology, executing mergers and acquisitions, and completing financing and public offering transactions. Mr. Germain graduated from New York University School of Law in 1975, where he was a member of the Order of the Coif, and was a partner at a New York law firm specializing in corporate and securities law until 1986. From 1986 to 1991, he served in senior executive roles, including as president of a public company that was subsequently sold. In addition to serving as Chairman of the Company, Mr. Germain is a Managing Director at The Aentib Group, a boutique merchant bank, and previously served on the board of Pluristem Therapeutics from 2007 through June 2022, including as Co-Chairman and lead independent director. He is also a co-founder and director of a number of private companies in and outside the biotechnology sector.

**Mr. Jay Green** CPA, CA, MAcc, joined the board of directors in 2022. He is currently the Chief Financial Officer of a privately held, Canadian-based healthcare services company, a role that he has held since January 2022. Prior to this, he completed a 19-year career with GSK across several progressive leadership positions in GSK's three businesses of consumer healthcare, pharmaceuticals, and vaccines, as well as corporate development. He also led GSK's global enterprise resource planning (ERP) program, one of the largest IT-enabled business transformation programs in the company's history. Mr. Green served from 2014 to 2020 as Senior Vice President, Finance and CFO of GSK's global vaccines business. In 2020 and 2021, Mr. Green served in an advisory role to Gavi for COVAX, an international initiative to support equitable distribution of COVID-19 vaccines. He is a Chartered Professional Accountant who holds a Master of Accounting from the University of Waterloo, Ontario, Canada.

**Dr. Yael Margolin** joined the board of directors in 2020. Dr. Margolin has more than 35 years of experience as senior manager, CEO and board member in venture capital and in the pharmaceutical and biotech industries, leading strategic and business planning, financing, team building, product development and corporate partnerships. From 2005 to 2019, Dr. Margolin served as President, Chief Executive Officer and director of Gamida Cell Ltd., a clinical stage biopharmaceutical company, leading the company from preclinical development through phase 3 international registration studies. Prior to that, Dr. Margolin was Vice President of Denali Ventures LLC, a venture capital firm focused on healthcare, and a program manager at Teva Pharmaceuticals. Dr. Margolin holds a bachelor of science in biology and a master of science Cum Laude from the department of microbiology, both from Tel Aviv University in Israel, a Ph.D. From the department of membrane research at the Weitzman Institute of Science in Rehovot, Israel and was a post-doctoral associate at the Yale University School of Medicine.

**Mr. Samuel Moed** joined the board of directors in 2020. Mr. Moed is a healthcare executive with over 35 years of experience. He was for seven years Head of Corporate Strategy at Bristol Myers Squibb ("BMS"), a global biopharma company, until his retirement in 2020. Prior to that role, Mr. Moed was Head of Strategy Worldwide Pharma, President of US Pharma and President of the WW Consumer Health care Business at BMS. In addition to Scinai, Mr. Moed serves on the board of Mediwound Ltd., a company that develops, manufactures and commercializes bio-therapeutic solutions for tissue repair and regeneration, is a Venture Partner at aMoon, a HealthTech and Life Sciences investment fund with Scinai's former controlling shareholder Mr. Marius Nacht as the anchor investor, and advises companies in the healthcare arena. Mr. Moed received his BA in history from Columbia University in New York City in 1985.

**Mr. Adi Raviv** joined the board of directors in 2020. Mr. Raviv is a senior financial executive with a career spanning over 35 years. He founded HTI Associates LLC in 1996 and since then has served as its managing member. <u>In</u> the past five years, and in the capacity of a consultant on behalf of HTI, Mr. Raviv has served as a Chief Executive Officer, Chief Financial Officer and Senior Advisor, respectively, to several healthcare and related companies, and continues to serve in a CFO role in one such company. In addition, since April 2016 he has been a Principal at Capacity Funding LLC, a company providing working capital solutions to small businesses. Prior to that, Mr. Raviv served in a chief financial officer position in two other companies that provide similar types of funding alternatives from 2009 to 2016. Mr. Raviv has extensive capital markets, cash management, corporate finance, investment banking, investor relations, restructuring, tax and treasury, and transactional experience along with knowledge of the private equity and venture capital arenas. Mr. Raviv co-founded THCG, Inc., a publicly traded technology merchant banking and consulting company (where he was also CFO), and has been involved with companies in challenging startup, growth, and turnaround environments. He was also an investment banker at Lehman Brothers, Oscar Gruss and Hambros over a span of a dozen years. Mr. Raviv served on the boards of directors of many private and several public companies, as well as various non-profit entities. He received a bachelor's degree in International Relations with honors from the Hebrew University of Jerusalem and an MBA, with honors, from Columbia University in New York City.

**Our Scientific Advisory Board**

Our Scientific Advisory Board includes specialists and experts in Israel, with experience in the fields of biochemistry, infectious diseases and medical research. Our Scientific Advisory Board plays an active role in advising us with respect to our products, technology development, clinical trials and safety. Pursuant to their respective appointment letters, our advisory board members are entitled to receive the following compensation: As approved by the board of directors of the Company, each SAB member receives in consideration for his/her Advisory Board membership and for provision of the Services as detailed in the standard SAB agreement approved by the board of directors, an award of RSUs for 5,000 (five thousand) ADSs, each representing 4,000 Ordinary Shares of the Company, as of the effective date of each SAB member agreement, pursuant to the 2018 Israeli Share Option Plan (the "Plan"), to vest in three equal tranches each consisting of 1,667 RSUs starting on the first anniversary of each SAB agreement subject to the continued provision of services on each vesting date. Each SAB member shall also receive annual cash compensation in the amount of $12,000 (twelve thousand USD), payable in two semiannual installments ($6000 each), with the first one paid within 60 days after the effective date of each SAB agreement in consideration for his/her Scientific Advisory Board membership and for provision of the services during the term of the agreement.

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

**Professor Dr. Matthias Dobbelstein** has served as Director of the Institute of Molecular Oncology at the University Medical Center Göttingen (UMG), Germany since 2005 and is also an Associate Member of the Max Planck Institute for Multidisciplinary Sciences (MPI-NAT). He received his training as a physician at the University of Munich (LMU) and performed research as a virologist and cancer biologist at Princeton University (USA), the University of Marburg (Germany) and the University of Southern Denmark. Professor Dobbelstein's research interests focus on principles of infections and cancer, including the application of anti-cancer drugs as antivirals, as well as alpaca-derived NanoAbs (nanosized antibodies also known as nanobodies and VHH antibodies) as therapeutics. His collaboration with Professor Dr. Dirk Görlich at MPI-NAT as highlighted in their 2021 EMBO Journal article titled "Neutralization of SARS-CoV-2 by highly potent, hyperthermostable, and mutation-tolerant nanobodies" forms the scientific basis of Scinai's exclusive license for development and commercialization of an innovative, self-administered, inhaled NanoAb for the treatment of COVID-19. In addition, Professor Dobbelstein, together with Professor Görlich, is collaborating with Scinai under a five-year strategic research agreement for the discovery, characterization and cloning of additional NanoAbs for the treatment of autoimmune diseases such as psoriasis, psoriatic arthritis, asthma and macular degeneration.

**Prof. Michael Schön** is a distinguished Professor and Director of the Department of Dermatology, Venereology, and Allergology at the University Medical Center Göttingen. He also serves as Vice Dean and Deputy Director for Research and Teaching and is the former director of the Lower Saxony Institute of Occupational Dermatology. Prof. Schön has been recognized with numerous awards for his groundbreaking research on immune reactions in inflammation. From 2011 to 2024, he was the Editor-in-Chief of the Journal of the German Dermatological Society. Currently, he holds the position of Secretary General and Vice President of the European Dermatology Forum (EDF). Prof. Schön earned his MD in Medicine from the University of Ulm, Germany. He has worked at the Free University of Berlin, Harvard Medical School and the universities of Düsseldorf and Magdeburg. Before his appointment at the University Medical Center Göttingen, he held a professorship in Experimental Biomedicine at the University of Würzburg. Michael has further qualifications in dermatopathology, allergology, immunology and health economics.

**Dr. Jonathan Sadeh** is an accomplished physician-scientist with over 20 years of experience in drug development and clinical research. He spent the last five years at Bristol-Myers Squibb (BMS), where he held multiple senior leadership positions, including Senior Vice President and Global Programs Head for Immunology, Cardiovascular, and Neuroscience; Immunology Therapeutic Area Head; and China R&D Head. Prior to BMS, Dr. Sadeh held senior leadership positions at Sanofi, AstraZeneca, and Schering-Plough. Dr. Sadeh earned his MD in Medicine from the Mount Sinai School of Medicine and an M.Sc. degree in Clinical Research from Harvard Medical School. He completed his fellowship in pulmonary and critical care at Harvard Medical School. He began his medical career as an academic researcher at Brigham and Women's Hospital.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Compensation** 

**Compensation of Directors and Executive Officers**

*Directors* 

 

Each of our non-management directors receives a cash retainer, meeting participation fees, and equity awards, as detailed below.

The annual cash compensation payable to our current and future non-management directors other than Mr. Germain (all such other directors, the "Independent Directors") in exchange for their services, is as follows:

● $35,000 for each Independent Director, which would cover such director's attendance at up to eight Board meetings per year;

● $5,000 for each member of the Company's Compensation Committee and Strategy Committee (other than the applicable committee chairperson), which would cover such member's attendance at up to eight committee meetings per year;

● $7,500 for each member of the Company's Audit Committee (other than the committee chairperson), which would cover such member's attendance at up to eight committee meetings per year;

● $7,500 for the chairperson of each of the Company's Compensation Committee and Strategy Committee, which would cover the chairperson's attendance at up to eight committee meetings per year;

● $10,000 for the chairperson of the Company's audit committee, which would cover the chairperson's attendance at up to eight committee meetings per year;

● $500 for attendance (in person or by video or other electronic means) by each director or committee member at any meeting of the Board or relevant committee in excess of eight meetings for the Board or the applicable committee; and

● $300 for each written consent of the Board or any of its committees.

Following shareholder approval, we granted equity awards to our non-management directors. In 2023, shareholders approved the option awards to each of our non-management directors. We granted to each such director (other than our chairman) options to purchase 2,000 ADSs of the Company, and to our chairman options to purchase 4,000 ADSs, all at an exercise price of $18.10, which was the higher of (i) 130% of the closing price of the Company's ADSs on June 15, 2023 (the date the Board approved this proposal) or (ii) 100% of the closing price of the Company's ADS on August 24, 2023 (the date of shareholder approval). The options vest in equal annual installments over a period of three years, commencing one year following the date of shareholder approval. The options are subject to accelerated vesting and will become immediately exercisable in the event of a change of control.

Following shareholder approval, we also cancelled options previously granted to our non-management directors and granted replacement options to these directors. In 2023, shareholders approved that all the options that were held at by non-management directors at the time of the meeting be cancelled and in exchange therefor the Company would grant each non-management director a replacement option to purchase such number of ADSs (each, a "Replacement Option") that is equal to the aggregate number of ADSs subject to the options held at the time by each non-management director. The number of ADSs underlying the Replacement Option that were issued to each non-management director in exchange for the options that were held by each such non-management director was as follows: (i) for Mr. Mark Germain, 2,907 ADSs; (ii) for Mr. Morris Laster; Mr. Adi Raviv, Professor Avner Rotman and Ms. Yael Margolin, 430 ADSs; (iii) Mr. Samuel Moed, 1,000 ADSs; and (iv) Mr. Jay Green, 250 ADSs. The exercise price of per ADS for the Replacement Options is $18.10, which was the higher of (i) 130% of the closing price of the Company's ADSs on June 15, 2023 (the date the Board approved this proposal) or (ii) 100% of the closing price of the Company's ADS on August 24, 2023 (the date of shareholders' approval). The options vest in equal annual installments over a period of three years, commencing one year following the date of shareholder approval. The options are subject to accelerated vesting and will become immediately exercisable in the event of a change of control.

For these purposes, a "Change of Control" means the first to occur of (i) a sale of all or substantially all of the assets of the Company; (ii) a merger, consolidation, or like transaction of the Company with or into another company; provided, that in the case of either clauses (i) or (ii) the Company's stockholders of record immediately prior to such transaction will, immediately after such transaction, hold less than fifty percent (50%) of the voting power of the surviving or acquiring entity, and provided further that a Change of Control shall not include (x) any consolidation, merger or reorganization effected to change the domicile of the Company or (y) any transaction or series of transactions effected principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; (iii) the acquisition by any person, entity or group of more than 50% of the voting power of the Company, in a single or series of related transactions; and (iv) when a person, entity or group becomes a shareholder that has "control," as defined in the Israeli Companies Law, 1999.

At our annual shareholders meeting held on December 22, 2025, our shareholders approved a grant of 60,000 restricted share units ("RSUs") to Amir Reichman. The RSUs vest in three equal annual installments commencing as of the date of the meeting, are subject to accelerated vesting and immediately exercisable in the event of a change of control and were granted in accordance with the capital gains tax route of Section 102 of the Israel Income Tax Ordinance ("Section 102") and otherwise in accordance with our 2018 Israeli Share Option Plan (the "2018 Plan"). At the meeting shareholders also approved a grant of options to purchase 25,000 ADSs to Mark Germain and options to purchase 12,500 ADSs to each of Adi Raviv, Dr. Yael Margolin, Samuel Moed and Jay Green. The exercise price per ADS for the options is $1.42, and the options vest in three equal annual installments commencing as of the date of the meeting, (ii), to the extent the options are vested, they continue to be exercisable during such term unless such director is terminated for cause, (iii) are subject to accelerated vesting and immediately exercisable in the event of a change of control and (iv) have a term of ten (10) years following the date of shareholder approval, and which for Israeli grantees are granted in accordance with Section 102, with all other terms as otherwise described in the 2018 Plan.

For the year ended December 31, 2025, we paid an aggregate of approximately $430 thousand to our directors.

 

*Executive Officers*

 

The following table presents information regarding compensation received by our executive officers during the year ended December 31, 2025.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <br>**Name** | **Base <br> Salary<br> or Other<br> Payment**<br>**USD <br> Thousands** | **Value of<br> Social<br> Benefits (1)**<br>**USD <br> Thousands** | **Value of<br> Equity Based<br> Compensation<br> Granted (2)**<br>**USD <br> Thousands** | **All Other<br> Compensation (3)**<br>**USD <br> Thousands** | **Total**<br>**USD <br> Thousands** |
| Mr. Amir Reichman <br> Chief Executive Officer | 342 | 38 | 135 | 11 | 526 |
| Dr. Tamar Ben-Yedidia(4) <br> Former Chief Scientific Officer | 98 | 28 | (28) | 11 | 109 |
| Mr. Uri Ben-Or <br> Chief Financial Officer | 165 | 10 | 4 |  | 179 |
| Mr. Elad Mark<br> Chief Operating Officer | 175 | 38 | 30 | 26 | 269 |
| Dr. Dalit Weinstein Fischer(5)<br> Former Chief Technology Officer | 73 | 21 | (38) | 6 | 62 |

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(1) Includes payments to the National Insurance Institute, advanced education funds, managers' insurance and pension funds; vacation pay; and recuperations pay as mandated by Israeli law.

(2) Includes RSU's and options.

(3) Includes payments for car allowance and bonus payment.

(4) Ms. Ben-Yedidia resigned from the Company, effective September 8, 2025.

(5) Ms. Weinstein Fischer resigned from the Company, effective July 8, 2025.

**Employment and Services Agreements** 

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

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

We have set aside or accrued a total amount of $400 thousand during 2025 to provide pension, retirement or similar benefits.

***Services Agreement with Our Chairman of the Board***

We are party to a services agreement with Mr. Germain, pursuant to which he receives a monthly payment of $12,500. Pursuant to this agreement, in May 2019 and May 2021 Mr. Germain was granted options to purchase ADSs which were replaced by the Replacement Options described above. The agreement was amended in May 2022 to provide for a term of three years rather than continuing on a monthly basis and provides that either party may terminate the agreement upon 90 days' written notice. In addition, in May 2022 we granted Mr. Germain a cash bonus of $90,000, and in August 2023, we granted Mr. Germain a cash bonus of $37,500. Mr. Germain voluntarily agreed to a 20% reduction in his monthly payment commencing mid-October 2024 until February 2025.

***Services and Employment Agreements with Our Chief Executive Officer***

Pursuant to his employment agreement entered into with us on January 20, 2021, Mr. Reichman is entitled to an annual gross salary of $350,000. Mr. Reichman voluntarily agreed to a 25% reduction in his monthly salary from mid-October 2024 until February 1, 2025.

The agreement also provides that Mr. Reichman was entitled to a one-time signing bonus at the gross lump sum amount of USD 50,000 and is eligible to receive an annual cash bonus of a gross amount equal to three to six monthly salaries to the extent Mr. Reichman meets annual objectives that shall be approved by the board of directors and by shareholders. It is currently contemplated that the annual bonus would be (i) four monthly salaries for meeting a set of baseline annual objectives, and (ii) three monthly salaries in the case of underperforming compared to such annual objectives, provided the Employee meets the baseline objectives set by the board of directors. Under extraordinary circumstances reflecting performance by Mr. Reichman significantly above all such annual objectives, the board of directors may, in its sole discretion, consider an additional cash bonus of not more than an additional three monthly salaries (up to nine monthly salaries in total). The bonus amounts and annual objectives shall be subject to the terms of the Company's Compensation Policy from time to time.

Furthermore, under the agreement Mr. Reichman received 6,000 RSUs under the Company's 2018 Israeli Share Option Plan, which vested over a period of five years and became fully vested on January 20, 2026. The ADSs underlying the RSUs may not be sold by Mr. Reichman during the term of his employment except that, commencing on the third anniversary of the Commencement Date, sales may be made pursuant to a Rule 10b5-1 plan, with the number of RSUs sold during any one year period not exceeding five percent of the vested RSUs held by Mr. Reichman at the time of such sales (the "Resale Limits"). The RSUs are subject to accelerated vesting in the event of a change of control.

For these purposes, a "change of control" means the first to occur of (i) a sale of all or substantially all of the assets of the Company; (ii) a merger, consolidation, or like transaction of the Company with or into another company; provided, that in the case of either clauses (i) or (ii) the Company's stockholders of record immediately prior to such transaction will, immediately after such transaction, hold less than fifty percent (50%) of the voting power of the surviving or acquiring entity, and provided further that a change of control shall not include (x) any consolidation, merger or reorganization effected to change the domicile of the Company or (y) any transaction or series of transactions effected principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; (iii) the acquisition by any person, entity or group not directly or indirectly affiliated with Angels Investments in Hi Tech Ltd. ("Angels") of more than 50% of the voting power of the Company, in a single or series of related transactions; and (iv) when a person, entity or group not directly or indirectly affiliated with Angels becomes a shareholder that has "control," as defined in the Israeli Companies Law, 1999.

The Company provides Mr. Reichman other benefits, such as a company car, vacation, sick days, contribution towards work disability insurance, monthly contributions equal to 7.5% of monthly salary to an Education Fund ("Keren Hishtalmut", a short-term savings plan available in Israel which is tax free to the employee up to a cap determined by law) and a manager's insurance policy or a pension fund and other benefits and perquisites similar to those of other officers of the Company.

Each of Mr. Reichman and the Company may terminate Mr. Reichman's employment by prior written notice of 60 days. In the event of termination by the Company without cause, the Company will pay Mr. Reichman nine monthly salaries, which includes amounts accrued in a pension insurance policy and amounts required by Israeli law.

In May 2022, we granted Mr. Reichman an annual bonus for the year 2021 of $250,266. In March 2023, we granted Mr. Reichman an annual cash bonus for the year 2022 of $182,000, equal to 50% of his annual base compensation) and 7,812 RSUs that vest in three years. In August 2024, following shareholder approval, we granted Mr. Reichman 17,909 RSUs that would vest over a period of three years. On November 21, 2024, the Board approved the grant to Mr. Reichman of 3,073 RSUs with vesting one-third on April 1, 2025, one-third on August 1, 2025, and one-third on December 1, 2025, subject to shareholder approval. At our annual shareholders meeting held on December 22, 2025, our shareholders approved a grant of 60,000 RSUs to Amir Reichman. The RSUs vest in three equal annual installments commencing as of the date of the meeting, are subject to accelerated vesting and immediately exercisable in the event of a change of control and are granted in accordance with the capital gains tax route of Section 102 and otherwise in accordance with the 2018 Plan.

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***Services and Employment Agreement with Our Chief Financial Officer***

Pursuant to the service agreement entered into on June 20, 2007, between us, Mr. Ben-Or and CFO Direct, an Israeli company solely owned by him through which he provides his services to us, as amended to date. CFO Direct is entitled to a monthly fee of NIS 40,000. The service agreement may be terminated by either us or CFO Direct with 60 days prior written notice. We may terminate our service agreement with CFO Direct at any time and effective immediately, without need for prior written notice, and without derogating from any other remedy to which we may be entitled, for cause (i.e., termination due to the conviction of CFO Direct and/or Uri Ben-Or of any felony, the liability of CFO Direct by a court of competent jurisdiction for fraud against us, any conduct that has a material adverse effect or is materially detrimental to us, including but not limited to, a breach of contract or any claim by CFO direct or any one connect thereto that CFO Direct is our employee).

In addition, pursuant to a separate employment agreement entered into between us and Mr. Ben-Or on August 31, 2014 and extended on June 11, 2020, Mr. Ben-Or is also employed by us in a 60% employment capacity, for which he is entitled to a monthly salary of NIS 10,000. Mr. Ben-Or is entitled to 60% of the annual paid vacation days prescribed under applicable law, and we shall obtain and maintain with Mr. Ben-Or a pension insurance to Mr. Ben-Or, in a Managers Insurance and/or a pension fund, according to Mr. Ben-Or's discretion. Mr. Ben-Or's employment agreement may be terminated by either us or Mr. Ben-Or with 60 days prior written notice, or by us immediately for cause. In October 2025, the Board approved a cash bonus of $30,000 to Mr. Ben-Or.

In addition, in connection with the time to be expended by Mr. Ben-Or in connection with the integration of our new subsidiary Scinai Biopharma with our CDMO business, we will pay CFO Direct an additional NIS 12,500 per month for a period of nine months, commencing April 2026.

***Employment Agreement with Our Chief Operating Officer***

Pursuant to his employment agreement entered into with us and Mr. Elad Mark on September 5, 2018, as amended, he is entitled to a monthly salary of NIS 55,000 (approximately $15,540), which also includes monthly contributions equal to 7.5% of his monthly salary to an Education Fund and a manager's insurance policy and other benefits and perquisites similar to those of other officers of the Company. In addition, we provide Mr. Mark with a leased company car and a mobile phone. Mr. Mark is entitled to 16 annual paid vacation days. Mr. Mark agreed to a 20% reduction in his monthly salary from mid-October 2024 until December 31, 2024.

Mr. Mark's employment agreement may be terminated by either us or Mr. Mark upon 60 days' prior written notice or by us immediately for cause (i.e., termination due to embezzlement of our funds, or the material breach of the terms and conditions of the employment agreement, or if Mr. Mark is involved in an act which constitutes a breach of trust between his and us or constitutes a severe breach of discipline, or conduct causing grave injury to us any, monetarily or otherwise, or Mr. Mark's inability to carry out his duties for a period exceeding 120 consecutive days, provided that his resumption of duties for a period of less than 15 consecutive days shall not be deemed to have broken the continuity of the aforementioned 120 days). In May 2022, Mr. Mark was granted a 2021 bonus of NIS 138,000 (approximately $37,000), an amount equal to three months' salary and 35,300 RSUs vesting in three years. For the year 2022, Mr. Mark was granted a performance-based incentive package of 138,000 NIS (approximately $39,000), an amount equal to 25% of his annual compensation. In January 2024, Mr. Mark was granted 5,089 RSUs which vest over three years.

**Equity Compensation Plans**

**2018 Israeli Share Option Plan**

The 2018 Plan permits the granting of options, restricted share units or allotment of shares or other equity-based awards to employees, directors, consultants, service providers and other entities which the board shall decide their services are considered valuable to the Company, under similar terms and conditions to the 2005 Plan.

Options granted under the 2018 Plan are subject to applicable vesting schedules and generally expire 10 years from the grant date.

Upon the termination of a recipient's engagement with us for any reason other than death, disability or for cause, all unvested options allocated shall automatically expire and all vested options allocated will automatically expire 90 days after the termination, unless expired earlier due to their term, or unless expiration is extended beyond termination under certain circumstance for a period not to exceed the term of the options, such as was recently approved by shareholders in connection with option grants to directors. If the recipient's engagement was terminated for cause (as defined in the 2018 Plan), the recipient's right to exercise any unexercised options, awarded and allocated in favor of such recipient, whether vested or not, will immediately cease and expire as of the date of such termination. If the recipient dies or is disabled, any vested but unexercised options will automatically expire 12 months from the termination of the engagement, unless expired earlier due to their term.

In the event that options allocated under the 2018 Plan expire or otherwise terminate in accordance with the provisions of the 2018 Plan, such expired or terminated options will become available for future grant awards and allocations under the 2018 Plan.

Restricted share units granted under the 2018 Plan are subject to applicable vesting schedules, and the Board may condition the grant or vesting of restricted share units upon the attainment of specified performance targets or such other factors as the Board may determine, in its sole discretion.

In the event of (i) the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially all of our share capital; or (iii) a merger, acquisition or reorganization of the Company with or into another corporation, then, subject to obtaining the applicable approvals of the Israeli tax authorities, unexercised awards then outstanding shall be assumed or substituted for an appropriate number of shares of the successor company subject to certain adjustments as determined by the board of directors in its sole discretion. Subject to certain conditions, the board shall also have the power to provide for immediate acceleration in a recipient's award agreement in the event of such a transaction.

The Company has reserved an unlimited amount of the issued and outstanding capital of the Company available for issuance under the 2018 Plan.

As of March 31, 2026, the Company had awarded grants under the Option Plan to acquire 1,778,588,298 ordinary shares represented by 444,647 ADSs.

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Board Practices** 

**Board of Directors**

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

Our board of directors has affirmatively determined that a majority of our directors are independent, in compliance with the NASDAQ Capital Market rules. The definition of independent director includes a set of statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the independent director to exercise independent judgment in addition to the requirement that the board consider any factor which would impair the ability of the independent director to exercise independent judgment. Independent directors may be elected by an ordinary majority of the general shareholders meeting.

Under our articles of association, our board of directors must consist of at least three and not more than eleven directors, including any external directors to the extent required by Israeli law. Our board of directors currently consists of nine members, including our non-executive Chairman of the board of directors. Our directors, excluding the external directors, are divided into three groups, as nearly equal in number as practicable, with staggered three-year terms, each consisting of one-third of the directors, constituting our entire board of directors (other than the external directors). At each annual meeting, the three-year duration of service of one group of directors shall expire and the directors of such group will stand for election. Each of the directors or the successors elected to replace the directors of a group whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting held after the date of his or her election and until his or her respective successor is elected. If no directors are appointed at the annual meeting, the directors appointed at the previous annual meeting will continue their service. Directors whose service period has ended may be appointed again.

Under our articles of association, our board of directors may appoint directors to fill vacancies on our board of directors, for a term of office for the remaining period of time during which the director whose service has ended was filled would have held office, or the conclusion of the term of office in accordance with our articles or any applicable law, subject to the maximum number of directors allowed under the articles of association. In addition, our shareholders may appoint an additional director/s to the Company, whether for the purpose of filling a position that was vacated or as an additional director/s.

Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. In determining the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise is one. Our board of directors has determined that Adi Raviv has accounting and financial expertise and possesses professional qualifications as required under the Companies Law.

***Chairman of the Board***

 ****

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

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

***External Directors***

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Companies incorporated under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on the Nasdaq Capital Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements under Israeli law relating to such matters as external directors, the audit committee, the compensation committee and an internal auditor. These requirements are in addition to the corporate governance requirements imposed by the listing rules of the Nasdaq Capital Market and other applicable provisions of U.S. securities laws.

Pursuant to regulations enacted under the Israeli Companies Law, the board of directors of a public company whose shares are listed on certain non-Israeli stock exchanges, including Nasdaq, that do not have a controlling shareholder (as such term is defined in the Israeli Companies Law), may, subject to certain conditions, elect to "opt-out" of the requirements of the Israeli Companies Law regarding the election of external directors and to the composition of the audit committee and compensation committee, provided that the company complies with the requirements as to director independence and audit committee and compensation committee composition applicable to companies that are incorporated in the jurisdiction in which its stock exchange is located. In March 2023, our board of directors elected to opt-out of the Israeli Companies Law requirements to appoint external directors and related Israeli Companies Law rules concerning the composition of the audit committee and compensation committee.

The foregoing exemptions will continue to be available to us so long as: (i) we do not have a "controlling shareholder" (as such term is defined under the Israeli Companies Law), (ii) our shares are traded on a U.S. stock exchange, including Nasdaq, and (iii) we comply with the Nasdaq rules applicable to domestic U.S. companies. If in the future we were to have a controlling shareholder, we would again be required to comply with the requirements relating to external directors and composition of the audit committee and compensation committee.

Under the Israeli Companies Law, the term "controlling shareholder" means a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. For the purpose of approving transactions with controlling shareholders, the term "controlling shareholder" also includes any shareholder that holds 25% or more of the voting rights of the company if no other shareholder holds more than 50% of the voting rights in the company.

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 **

***Audit Committee***

 **

Our audit committee consists of Mr. Adi Raviv, Dr. Yael Margolin and Mr. Jay Green. Mr. Adi Raviv serves as the chairman of the audit committee.

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

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

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

**Audit Committee Role**

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

● oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law;

● recommending the engagement or termination of the person filling the office of our internal auditor; and

● recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors.

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

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***Compensation Committee and Compensation Policy***

Compensation Committee

Our compensation committee currently consists of Mr. Adi Raviv, Dr. Yael Margolin and Mr. Sam Moed. Dr. Yael Margolin serves as the Chairman of the Compensation committee. The duties of the compensation committee include the recommendation to the company's board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. That policy must be adopted by the company's board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company's shareholders, which approval requires a special approval for Compensation as described below under "Approval of Related Party Transactions Under Israeli Law — Fiduciary Duties of Directors and Executive Officers".

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

Compensation Policy

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

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

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

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

Pursuant to the Companies Law and following the recommendation of our compensation committee, our board of directors approved our compensation policy, and our shareholders, in turn, approved the Compensation Policy at our annual general meeting of shareholders that was held on December 27, 2021. Our shareholders approved amendments to our compensation policy on August 24, 2023.

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

● the knowledge, skills, expertise and accomplishments of the relevant office holder;

● the office holder's roles and responsibilities and prior compensation agreements with him or her;

● the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of the company, including those employed through manpower companies, in particular the ratio between such cost and the average and median compensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;

● the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and

● as to severance compensation, if any, the period of service of the office holder, the terms of his or her compensation during such service period, the company's performance during that period of service, the person's contribution towards the company's achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.

The Compensation Policy must also include:

● a link between variable compensation and long-term performance and measurable criteria;

● the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;

● the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company's financial statements;

● the minimum holding or vesting period for variable, equity-based compensation; and

● maximum limits for severance compensation.

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

● recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);

● recommending to the board of directors periodic updates to the compensation policy;

● assessing implementation of the compensation policy; and

● determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.

Our compensation committee's responsibilities include:

● reviewing and recommending overall compensation policies with respect to our Chief Executive Officers and other executive officers;

● reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officers and other executive officers including evaluating their performance in light of such goals and objectives;

● reviewing and approving the granting of options and other incentive awards; and

● reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.

***Internal Auditor***

 ****

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

● a person (or a relative of a person) who holds more than 5% of the company's outstanding shares or voting rights;

● a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;

● an office holder (including a director) of the company (or a relative thereof); or

● a member of the company's independent accounting firm, or anyone on his or her behalf.

● The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal auditor's work plan. On October 22, 2014, we appointed Mr. Gewirtz Yisrael as our internal auditor. Mr. Gewirtz Yisrael is a certified internal auditor and a partner at Fahn Kanne & Co. Grant Thornton Israel, a certified public accounting firm in Israel.

● The board of directors shall determine the direct supervisor of the internal auditor. The internal auditor is required to submit his findings to the audit committee, unless specified otherwise by the board of directors.

**Approval of Related Party Transactions under Israeli Law**

***Fiduciary Duties of Directors and Executive Officers***

 ****

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

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

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

● information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

● all other important information pertaining to any such action.

The duty of loyalty includes a duty to:

● refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;

● refrain from any activity that is competitive with the company;

● refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and

● disclose to the company any information or documents relating to the company's affairs which the office holder received as a result of his or her position as an office holder.

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

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

● a transaction other than in the ordinary course of business;

● a transaction that is not on market terms; or

● a transaction that may have a material impact on a company's profitability, assets or liabilities.

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

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

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

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

● at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting at the meeting approving the transaction, excluding abstentions; or

● the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the meeting do not exceed 2% of the voting rights in the company.

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

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

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

**Shareholder Duties**

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

● an amendment to the company's articles of association;

● an increase of the company's authorized share capital;

● a merger; or

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

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

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

**Exculpation, Insurance and Indemnification of Directors and Officers**

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

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

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

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

● reasonable litigation expenses, including attorneys' fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.

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

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

● a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and

● a financial liability imposed on the office holder in favor of a third party.

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

● a breach of duty of care to the company or to a third party.

● any other action against which we are permitted by law to insure an office holder;

● expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law including the Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendment), 5771-2011 and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigation expenses and attorney fees; and

● a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.

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

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

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

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

● a fine, civil fine, administrative fine or ransom or levied against the office holder.

Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Employees** 

As of March 31, 2026, we had 45 employees, 41 of whom were employed in the CDMO subsidiary company and 4 of whom were employed in research and development. All Company employees are in Israel.

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

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

&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Share Ownership** 

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

&nbsp;&nbsp;&nbsp;&nbsp;**F.** **Disclosure Of A Registrant's Action To Recover Erroneously Awarded Compensation** 

Not Applicable.

**Item 7.** **MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Major Shareholders** 

The following table sets forth certain information as of March 31, 2026 concerning the beneficial ownership of ADSs of: (i) each director and director nominee, (ii) each Named Executive Officer in the Summary Compensation Table under "Executive Compensation" above, (iii) all executive officers and directors as a group, and (iv) each person (including any "group" as that term is used in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of 5% or more of our ADSs. The address for each of the persons below who are beneficial owners of 5% or more of our ADSs is our corporate address at Scinai Immunotherapeutics Ltd., Jerusalem BioPark, 2nd floor, Hadassah Ein Kerem Campus, Jerusalem, Israel. The information with respect to beneficial ownership of ADSs by certain of our major shareholders is given based on information reported in such shareholder's Schedule 13G or Schedule 13D.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to ADSs. ADSs issuable under share options or other conversion rights that were exercisable within 60 days after March 31, 2026, are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options or other conversion rights but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. The percentage of ADSs beneficially owned is based on 3,535,489 ADSs outstanding as of March 31, 2026.

Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all ADSs that they beneficially own.

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

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

---

| | | |
|:---|:---|:---|
|  |<br>**ADSs** | **Percent of**<br>**Class %** |
| **Directors and Executive Officers** | | |
| Mark Germain (1) | 5180 | \* |
| Adi Raviv (2) | 337 | \* |
| Yael Margolin (3) | 337 | \* |
| Sam Moed (4) | 667 | \* |
| Amir Reichman (5) | 28525 | \* |
| Jay Green (6) | 50 | \* |
| Uri Ben-Or (7) | 1594 | \* |
| Elad Mark (8) | 6757 | \* |
| All executive officers and directors as a group (8 people) | 43746 | \* |
| **5% Shareholders** |  |  |
| Daniel E. Stone (9) | 353195 | 9.99% |

---

\* Less than 1%.

(1) Consists of 5,180 ADSs issuable upon settlement of vested options and RSUs.

(2) Consists of 50 ADSs, and 287 ADSs issuable upon settlement of vested options and RSUs.

(3) Consists of 50 ADSs, and 287 ADSs issuable upon settlement of vested options and RSUs .

(4) Consists of 667 ADSs issuable upon settlement of vested options and RSUs.

(5) Consists of 19,812 ADSs, and 9,014 ADSs issuable upon settlement of vested options and RSUs.

(6) Consists of 50 ADSs .

(7) Consists of 1,181 ADSs, and 413 ADSs issuable upon settlement of vested options and RSUs.

(8) Consists of 4,872 ADSs, and 1,885 ADSs issuable upon settlement of vested options and RSUs.

(9) Includes 307,000 ADSs held directly and 283,426 ADSs issuable upon exercise of pre-funded warrants held by RK RK Stone Miami LLC ("RK"), which may not be exercised if such exercise would result in beneficial ownership by RK, together with its affiliates (which include the reporting person) and certain other persons, of greater than 9.99% of the ordinary shares. Future issuances of ordinary shares or ADSs by us to third parties are expected to cause additional amounts of pre-funded warrants to become exercisable within the foregoing limitation, without increasing RK's beneficial ownership percentage. The address of Daniel E Stone is 1200 Brickell Avenue, #1470 Miami, FL 33131.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Related Party Transactions** 

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

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

**Indemnification Agreements**

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

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

**Employment and Service Agreements**

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

**Family Relationships**

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

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Interests of Experts and Counsel** 

Not applicable.

**Item 8.** **FINANCIAL INFORMATION**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Consolidated Statements and Other Financial Information** 

**Consolidated Financial Statements**

We have appended our consolidated financial statements at the end of this annual report, starting at page F-1, as part of this annual report.

**Legal Proceedings**

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, or proceeding by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company, threatened against or affecting our Company, our ordinary shares, our officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

**Dividend Policy**

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

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

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Significant Changes** 

No significant changes have occurred since December 31, 2025, except as otherwise disclosed in this annual report.

**Item 9.** **THE OFFER AND LISTING**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Listing Details** 

Our Ordinary Shares were traded on the TASE under the symbol "BNDX" from June 18, 2007 and under the symbol "BVXV" from May 18, 2015 to February 2018 and were voluntarily delisted from trading on the TASE, effective February 2018. The ADSs have traded on the Nasdaq Capital Market under the symbol "BVXV" since May 11, 2015, and since September 7, 2023, under the symbol "SCNI". The ADS warrants issued to investors in our initial public offering in the U.S. were traded on the Nasdaq Capital Market under the symbol "BVXVW" from May 11, 2015 until May 13, 2020.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Plan of Distribution** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Markets** 

The ADSs, each representing four thousand Ordinary Shares and evidenced by an American depositary receipt, or ADR, are traded on the Nasdaq Global Market under the symbol "SCNI." The ADRs were issued pursuant to a Depositary Agreement entered into with The Bank of New York Mellon.

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Selling Shareholders** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Dilution** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**F.** **Expenses of the Issue** 

Not applicable.

**Item 10.** **ADDITIONAL INFORMATION**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Share Capital** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Articles of Association** 

Our number with the Israeli Registrar of Companies is 51-343610-5. Our purpose as set forth in our Articles of Association is to engage in every lawful purpose in the field of biotechnology.

Our authorized share capital consists of (i) 100,000,000,000 Ordinary Shares, no par value, the equivalent of 25 million ADSs (each ADS representing 4,000 Ordinary Shares), and (ii) 1,000 preferred shares, no par value per share. As of March 31, 2026, there were 14,141,955,584 Ordinary Shares issued and outstanding (all of which were represented by ADSs other than 3,584 Ordinary Shares). All of our outstanding Ordinary Shares are validly issued, fully paid and non-assessable. Our Ordinary Shares are not redeemable and do not have any preemptive rights.

***Voting Rights***

 ****

Holders of our Ordinary Shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting. According to the Companies Law and the regulations promulgated thereunder, for purposes of determining the shareholders entitled to notice and to vote at such meeting, the board of directors may fix the record date not more than 60 nor less than four calendar days prior to the date of the meeting, provided that an announcement regarding the general meeting be given prior to the record date. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders' resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the prior approval of the holders of at least 75% of our Ordinary Shares, represented and voting at a general meeting.

Our Ordinary Shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors under the Israeli Companies Law.

***Transfer of Shares***

 ****

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

***The Powers of the Directors***

 ****

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

***Amendment of share capital***

 ****

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

***Dividends***

 ****

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

***Shareholder Meetings***

 ****

Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year and in any event no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special meetings. Our board of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, as a company whose shares are listed for trade on an exchange outside of Israel, the Companies Law provides that our board of directors is required to convene a special meeting upon the written request of (i) any two of our directors or one quarter of the directors then in office; or (ii) one or more shareholders holding, in the aggregate either (a) 10% of our issued share capital and 1% of our outstanding voting power, or (b) 10% of our outstanding voting power.

Under Israeli law, one or more shareholders holding at least 1% of the voting rights at the general meeting may request that the board of directors include a matter in the agenda of a general meeting to be convened in the future (or, with respect to a company whose shares are listed for trade on an exchange outside of Israel, such as us, 5% if the matter is the appointment or removal of a director), provided that it is appropriate to discuss such any other matter at the general meeting

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

● amendments to our articles of association;

● appointment or termination of our auditors;

● appointment of directors and appointment and dismissal of external directors;

● approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;

● director compensation, indemnification and change of the principal executive officer;

● increases or reductions of our authorized share capital;

● a merger;

● the exercise of our board of directors' powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management; and

● authorizing the chairman of the board of directors or his relative to act as the company's chief executive officer or act with such authority; or authorize the company's chief executive officer or his relative to act as the chairman of the board of directors or act with such authority.

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

***Quorum***

The quorum required for our general meetings of shareholders consists of one or more shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law who hold or represent, in the aggregate, at least 10% (or, for so long we do not qualify as a foreign private issuer and for only so long as required by the Nasdaq Stock Market, 33 1/3% of the Company's outstanding Ordinary Shares) of the total outstanding voting rights, within half an hour from the appointed time.

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

***Resolutions***

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

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

● an appointment or removal of directors;

● an approval of transactions with office holders or interested or related parties, that require shareholder approval;

● an approval of a merger;

● authorizing the chairman of the board of directors or his relative to act as the company's chief executive officer or act with such authority; or authorize the company's chief executive officer or his relative to act as the chairman of the board of directors or act with such authority;

● any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate any additional matters; and

● other matters which may be prescribed by Israel's Minister of Justice.

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

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

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

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

***Access to Corporate Records***

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

***Acquisitions under Israeli Law***

*Full Tender Offer*

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

*Special Tender Offer*

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

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

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

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

*Merger*

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

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

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

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

*Antitakeover Measures*

 

The Companies Law allows us to create and issue shares having rights different from those attached to our Ordinary Shares, including shares providing certain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we have authorized and issued ordinary shares and preferred shares. In the future, if we do create and issue a class of shares other than Ordinary Shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their Ordinary Shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the prior approval of the holders of at least 75% of our Ordinary Shares at a general meeting. Shareholders voting in such meeting will be subject to the restrictions provided in the Companies Law as described above.

**Transfer Agent and Depositary**

The transfer agent and registrar for our Ordinary Shares is Vstock Transfer, LLC. The ADSs were issued pursuant to a Depositary Agreement entered into with The Bank of New York Mellon, which acts as depositary.

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Material Contracts** 

Our material agreements are (i) the license agreements and research collaboration agreements with MPG, (ii) the finance agreement with EIB, and (iii) our lease agreement for our facility in Jerusalem, each of which is described elsewhere in this Annual Report. We have not entered into any other material agreements in the two years immediately preceding the date of this Annual Report.

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Exchange Controls** 

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

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

&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Taxation** 

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

**Material U.S. Federal Income Tax Considerations** 

The following is a summary of the material U.S. federal income tax consequences relating to the acquisition, ownership, and disposition of the Warrants and ADSs (collectively, the "Securities") by U.S. Holders, as defined below. This summary addresses solely U.S. Holders who acquire the Securities pursuant to this offering and who hold the Securities as capital assets for tax purposes. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), current and proposed U.S. Treasury regulations promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon representations of the depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms. This summary does not address all U.S. federal income tax matters that may be relevant to a particular holder or all tax considerations that may be relevant with respect to an investment in the Securities.

This summary does not address tax considerations applicable to a holder of the Securities that may be subject to special tax rules including, without limitation, the following:

● dealers or traders in securities, currencies, or notional principal contracts;

● banks, insurance companies, and other financial institutions;

● real estate investment trusts or regulated investment companies;

● persons or corporations subject to an alternative minimum tax;

● tax-exempt organizations;

● traders that have elected mark-to-market accounting;

● corporations that accumulate earnings to avoid U.S. tax;

● pension plans;

● investors that hold the Securities as part of a "straddle," "hedge," or "conversion transaction" with other investments;

● persons that actually or constructively own 10 percent or more of our Ordinary Shares outstanding by vote or by value;

● persons that are treated as partnerships or other pass-through entities for U.S. federal income purposes; and

● U.S. Holders whose functional currency is not the U.S. dollar.

This summary does not address the effect of any U.S. federal taxation other than U.S. federal income taxation, and does not include any discussion of state, local, or foreign tax consequences to a holder of the Securities. In addition, this summary does not include any discussion of the U.S. federal income tax consequences to any holder of Securities that is not a U.S. Holder.

**You are urged to consult your own tax advisor regarding the foreign and U.S. federal, state, and local income and other tax consequences of an investment in the Securities, including the potential effects of any proposed legislation, if enacted.**

For purposes of this summary, a "U.S. Holder" means a beneficial owner of a Security that is for U.S. federal income tax purposes:

● an individual who is a citizen or resident of the U.S.;

● a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the U.S. or under the laws of the U.S., any state thereof, or the District of Columbia;

● an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

● a trust (1) if (a) a court within the U.S. is able to exercise primary supervision over the administration of the trust and (b) one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If an entity or arrangement that is classified as a partnership for U.S. federal tax purposes holds any Securities, the U.S. federal tax treatment of its partners will generally depend upon the status of the partners and the activities of the partnership. Entities or arrangements that are classified as partnerships for U.S. federal tax purposes and persons holding any Securities through such entities should consult their own tax advisors.

In general, and assuming that all obligations under the Deposit Agreement will be satisfied in accordance with the terms of the Deposit Agreement, if you hold ADSs, you will be treated as the holder of the underlying Ordinary Shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, gain or loss generally will not be recognized if you exchange ADSs for the underlying Ordinary Shares represented by those ADSs.

*Distributions*

If we make any distribution with respect to the Securities, subject to the discussion under "– Passive Foreign Investment Companies" below, the gross amount of any distribution actually or constructively received by a U.S. Holder (through the Depositary) with respect to a Security will generally be taxable to the U.S. Holder as foreign-source dividend income to the extent of our current and accumulated earnings and profits as determined under U.S. federal income tax principles. The amount distributed will include the amount of any Israeli taxes withheld from such distribution, as described above under the caption "Material Tax Considerations-Israeli Tax Considerations." A U.S. Holder will not be eligible for any dividends received deduction in respect of the dividends paid by us, which deduction is otherwise available to a corporate U.S. Holder in respect of dividends received from a domestic corporation. Distributions in excess of earnings and profits will be non-taxable to the U.S. Holder to the extent of the U.S. Holder's adjusted tax basis in its Securities. Distributions in excess of such adjusted tax basis will generally be taxable to a U.S. Holder as capital gain from the sale or exchange of property as described below under "-Sale or Other Disposition of ADSs and Warrants." If we do not report to a U.S. Holder the portion of a distribution that exceeds earnings and profits, then the distribution will generally be taxable as a dividend. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.

Under the Code, certain qualified dividends received by non-corporate U.S. Holders will be subject to U.S. federal income tax at the preferential long-term capital gains of, currently, a maximum of 20%. This preferential income tax rate is applicable only to dividends paid by a "qualified foreign corporation" that is not a PFIC (as defined below under "– Passive Foreign Investment Companies,") for the year in which the dividend is paid or for the preceding taxable year, and only with respect to the Securities held by a qualified U.S. Holder (i.e., a non-corporate holder) for a minimum holding period (generally 61 days during the 121-day period beginning 60 days before the ex-dividend date) and certain other holding period requirements are met. If such holding period requirements are met, dividends we pay with respect to the Securities generally will be qualified dividend income. However, if we were a PFIC, dividends paid by us to individual U.S. Holders would not be eligible for the reduced income tax rate applicable to qualified dividends. As discussed below under "– Passive Foreign Investment Companies," we do not anticipate being treated as a PFIC for this year; however, there can be no assurance that we will not be treated as a PFIC for our current taxable or future taxable years. You should consult your own tax advisor regarding the availability of this preferential tax rate under your particular circumstances.

The amount of any distribution paid in a currency other than U.S. dollars (a "foreign currency"), including the amount of any withholding tax thereon, will be included in the gross income of a U.S. Holder in an amount equal to the U.S. dollar value of the foreign currency calculated by reference to the exchange rate in effect on the date of the U.S. Holder's (or, in the case of ADSs, the depositary's) receipt of the dividend, actively or constructively, regardless of whether the foreign currency is converted into U.S. dollars. If the foreign currency is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize a foreign currency gain or loss in respect of the dividend. If the foreign currency received in the distribution is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss on a subsequent conversion or other disposition of the foreign currency will be treated as U.S. source ordinary income or loss and will not be eligible for the preferential rate applicable to qualified dividend income.

Subject to certain conditions and limitations, any Israeli taxes withheld on dividends may be creditable against a U.S. Holder's U.S. federal income tax liability, subject to generally applicable limitations. The rules relating to foreign tax credits and the timing thereof are complex. You should consult your own tax advisors regarding the availability of a foreign tax credit in your particular situation.

*Sale, Exchange, or Other Disposition of ADSs and Warrants*

Subject to the discussion under "– Passive Foreign Investment Companies" below, a U.S. Holder that sells or otherwise disposes of its Securities will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized on the sale or other disposition and such U.S. Holder's adjusted basis in the Securities. Such gain or loss generally will be capital gain or loss and will be a long-term capital gain or loss if the U.S. Holder's holding period of the Securities exceeds one year at the time of the sale or other disposition. Long-term capital gains realized by non-corporate U.S. Holders are generally subject to a preferential U.S. federal income tax rate. In general, gain or loss recognized by a U.S. Holder on the sale or other disposition of the Securities will be U.S. source gain or loss for purposes of the foreign tax credit limitation. However, if we are a PFIC, any such gain will be subject to the PFIC rules, as discussed below, rather than being taxed as a capital gain. As discussed below in "-Passive Foreign Investment Companies," we do not anticipate being a PFIC for this year; however, there can be no assurance that we will not be treated as a PFIC for our current taxable year and future taxable years.

If a U.S. Holder receives foreign currency upon a sale or exchange of the Securities, gain or loss will be recognized in the manner described above under "– Distributions." However, if such foreign currency is converted into U.S. dollars on the date received by the U.S. Holder, the U.S. Holder generally should not be required to recognize any foreign currency gain or loss on such conversion.

As discussed above under the heading "Material Tax Considerations-Israeli Tax Considerations-Taxation of Shareholders," a U.S. Holder who holds Securities through an Israeli broker or other Israeli intermediary may be subject to Israeli withholding tax on any capital gains recognized on a sale or other disposition of the Securities. Any Israeli tax paid under circumstances in which an exemption from (or a refund of or a reduction in) such tax was available will not be creditable for U.S. federal income tax purposes. U.S. Holders are advised to consult their Israeli broker or intermediary regarding the procedures for obtaining an exemption or reduction.

*Medicare Tax on Unearned Income*

Non-corporate U.S. Holders whose income exceeds certain thresholds are required to pay an additional 3.8% tax on their net investment income, which includes dividends paid on the Securities and capital gains from the sale or other disposition of the Securities.

*Passive Foreign Investment Companies*

Although we do not anticipate being treated as a passive foreign investment company ("PFIC") for this year, the treatment of the Company as a PFIC is based on the value and composition of our assets, and no assurance can be given that we will not be treated as a PFIC for U.S. federal income tax purposes for our current taxable year or future taxable years. We will be considered a PFIC for any taxable year if:

● at least 75% of our gross income for such taxable year is passive income; or

● at least 50% of the value of our assets (based on an average of the fair market values of the assets determined at the end of each quarter during a taxable year) is attributable to assets that produce or are held for the production of passive income.

For purposes of the above calculations, if we own, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, we will be treated as if we (a) held a proportionate share of the assets of such other corporation and (b) received a proportionate share of the income of such other corporation directly. Passive income generally includes, among other things, dividends, interest, rents, royalties and certain capital gain, but generally excludes rents and royalties that are derived in the active conduct of a trade or business and which are received from a person other than a related person.

A separate determination must be made each taxable year as to whether we are a PFIC (after the close of each such taxable year). Because the value of our assets for purposes of the asset test will generally be determined by reference to the market price of the ADSs and Warrants, our PFIC status will also depend in large part on the market price of the Securities, which may fluctuate significantly.

If we are a PFIC for any year during which a U.S. Holder holds any Securities, we generally will be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder holds the Securities, unless we cease to be a PFIC and such U.S. Holder makes a "deemed sale" election with respect to the Securities that such U.S. Holder holds. For this purpose, a U.S. Holder that acquired an ADS through the exercise of a Warrant will be treated as holding such ADS for the period during which such Warrant was held. A U.S. Holder that makes such an election will be deemed to have sold the Securities 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 from such deemed sale will be subject to the U.S. federal income tax treatment described below. After the deemed sale election, the Securities with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

For each taxable year for which we are treated as a PFIC with respect to a U.S. Holder, such U.S. Holder will be subject to special tax rules with respect to any "excess distribution" it receives and any gain it realizes from a sale or other disposition (including a pledge) of the Securities, unless it makes a "mark-to-market" election or a "qualified electing fund" election discussed below. Distributions that a U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions it received during the shorter of the three preceding taxable years or its holding period for the Securities will be treated as an excess distribution. Under these special tax rules, if a U.S. Holder receives any excess distribution or realizes any gain from a sale or other disposition of the Securities:

● the excess distribution or gain will be allocated ratably over the U.S. Holder's holding period for the Securities;

● the amount of excess distribution or gain allocated to the current taxable year, and any taxable year before the first taxable year in which we were a PFIC, must be included in the U.S. Holder's gross income (as ordinary income) for the tax year of the sale or disposition; and

● the amount allocated to each other year will be subject to the highest marginal tax rate in effect with respect to such U.S. Holder for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to such amounts allocated to each other year.

The tax liability for amounts allocated to years before the year of disposition or "excess distribution" cannot be offset by any losses for such years. Additionally, any gains realized on the sale of the Securities cannot be treated as capital gains.

If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, to the extent any of our subsidiaries are also PFICs, such U.S. Holder will be deemed to own its proportionate share of any such subsidiaries that are PFICs, and such U.S. Holder may be subject to the rules described in the preceding two paragraphs with respect to the shares of such subsidiaries that are PFICs it will be deemed to own. As a result, a U.S. Holder may incur liability for any "excess distribution" described above if we receive a distribution from such subsidiaries that are PFICs or if we dispose of, or are deemed to dispose of, any shares in such subsidiaries that are PFICs. You should consult your own tax advisor regarding the application of the PFIC rules to any of our subsidiaries.

Alternatively, a U.S. Holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the general tax treatment for PFICs discussed above. If a U.S. Holder makes a mark-to-market election for the ADSs, such U.S. Holder will include in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs as of the close of such U.S. Holder's taxable year over such U.S. Holder's adjusted basis in such ADSs. A U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the ADSs over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ADSs included in a U.S. Holder's income for prior taxable years. Amounts included in a U.S. Holder's income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ADSs, as well as to any loss realized on the actual sale or disposition of the ADSs to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for the ADSs. A U.S. Holder's basis in the ADSs will be adjusted to reflect any such income or loss amounts. If a U.S. Holder makes a valid mark-to-market election, the tax rules that apply to distributions by corporations that are not PFICs will apply to distributions by us, except the lower applicable tax rate for qualified dividend income will not apply. If we cease to be a PFIC when a U.S. Holder has a mark-to-market election in effect, gain or loss realized by such U.S. Holder on the sale of the ADSs will be a capital gain or loss and taxed in the manner described above under "– Sale, Exchange, or Other Disposition of ADSs and Warrants."

The mark-to-market election is available only for "marketable stock," which is a stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter, or regularly traded, on a qualified exchange or another market, as defined in applicable U.S. Treasury regulations. Any trades that have as their principal purpose meeting this requirement will be disregarded. The ADSs are listed on Nasdaq and, accordingly, provided the ADSs are regularly traded, the mark-to-market election will be available to a U.S. Holder of ADSs if we are a PFIC. Once made, the election cannot be revoked without the consent of the IRS unless the ADSs cease to be marketable stock. If we are a PFIC for any year in which the U.S. Holder owns the ADSs but before a mark-to-market election is made, the interest charge rules described above will apply to any mark-to-market gain recognized in the year the election is made. If any of our subsidiaries are or become PFICs, the mark-to-market election will not be available with respect to the shares of such subsidiaries that are treated as owned by a U.S. Holder. Consequently, a U.S. Holder could be subject to the PFIC rules with respect to income of the lower-tier PFICs the value of which already had been taken into account indirectly via mark-to-market adjustments. You should consult your own tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.

In certain circumstances, a U.S. Holder of stock in a PFIC can make a "qualified electing fund" election to mitigate some of the adverse tax consequences of holding stock in a PFIC by including in income its share of the corporation's income on a current basis. However, we do not currently intend to prepare or provide the information that would enable a U.S. Holder to make a qualified electing fund election.

Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual information return on IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualifying Electing Fund) containing such information as the U.S. Treasury may require. A U.S. Holder's failure to file such annual information return could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax. You should consult your own tax advisors regarding the requirements of filing such information returns under these rules, taking into account the uncertainty as to whether we are currently treated as or may become a PFIC.

**YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE IMPACT AND APPLICATION OF THE PFIC RULES ON YOUR INVESTMENT IN THE SECURITIES.**

*Backup Withholding and Information Reporting*

Payments of dividends with respect to the Securities and the proceeds from the sale, retirement, or other disposition of the Securities made by a U.S. paying agent or other U.S. intermediary will generally be reported to the IRS and to the U.S. Holder as may be required under applicable U.S. Treasury regulations. We, or an agent, a broker, or any paying agent, as the case may be, may be required to withhold tax (backup withholding), currently at the rate of 24%, if a non-corporate U.S. Holder that is not otherwise exempt fails to provide an accurate taxpayer identification number and comply with other IRS requirements concerning information reporting. Certain U.S. Holders (including, among others, corporations and tax-exempt organizations) are not subject to backup withholding. Backup withholding is not an additional tax. Any amount of backup withholding withheld may be used as a credit against your U.S. federal income tax liability or may be refunded provided that the required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.

You should consult your own tax advisors regarding the backup withholding tax and information reporting rules.

*Foreign Asset Reporting*

Certain U.S. Holders who are individuals are required to report information relating to an interest in the Securities, subject to certain exceptions (including an exception for shares held in accounts maintained by financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of the Securities.

**EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES IN LIGHT OF SUCH INVESTOR'S PARTICULAR CIRCUMSTANCES.**

**Israeli Tax Considerations** 

***General***

The following is a brief summary of the material tax consequences under Israeli law concerning the purchase, ownership and disposition of American Depositary Shares, representing Ordinary Shares, Pre-funded Warrants and Warrants (collectively, the "Shares") by persons who acquired the Shares in this offering.

This discussion does not purport to constitute a complete analysis of all potential tax consequences applicable to investors upon purchasing, owning or disposing of our Shares. In particular, this discussion does not take into account the specific circumstances of any particular investor (such as tax-exempt entities, financial institutions, certain financial companies, broker-dealers, investors that own, directly or indirectly, 10% or more of our outstanding voting rights, all of whom are subject to special tax regimes not covered under this discussion). To the extent that issues discussed herein are based on legislation that has yet to be subject to judicial or administrative interpretation, there can be no assurance that the views expressed herein will accord with any such interpretation in the future. This discussion is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below, possibly with retroactive effect. The discussion below is not intended, and should not be construed, as legal or professional tax advice and does not cover all possible tax considerations.

Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership, and disposition of the Shares, including, in particular, the effect of any foreign, state or local taxes.

***General Corporate Tax Structure in Israel***

Israeli resident companies are generally subject to corporate tax on their taxable income at the rate of 23% for the 2025 tax year. A corporation will generally be considered as an "Israeli resident company" if it meets one of the following: (i) it was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.

***Taxation of Shareholders***

***Capital Gains***

Capital gain tax is imposed on the disposition of capital assets by an Israeli resident and on the disposition of such assets by a non-Israeli resident if those assets are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly or indirectly, rights to assets located in Israel, unless an exemption is available or unless an applicable double tax treaty between Israel and the seller's country of residence provides otherwise. The Israeli Income Tax Ordinance distinguishes between "Real Gain" and the "Inflationary Surplus". "Real Gain" is the excess of the total capital gain over Inflationary Surplus generally computed on the basis of the increase in the Israeli Consumer Price Index between the date of purchase and the date of disposition. Inflationary Surplus is not currently subject to tax in Israel.

In 2025, Real Gain accrued by individuals on the sale of the Shares will be taxed at the rate of 25%. However, if the individual shareholder is a "Substantial Shareholder" (i.e., a person who holds, directly or indirectly, alone or together with another, 10% or more of one of the Israeli resident company's Means Of Control) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%."Means Of Control" generally include the right to vote, receive profits, nominate a director or other general manager or like the same, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right.

Corporate and individual shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (23% for corporations in 2025), and a marginal tax rate of up to 47% in 2025 for individuals (not including a Excess Tax as discussed below).

Notwithstanding the foregoing, capital gains generated from the sale of our Shares by a non-Israeli resident shareholder may be exempt from Israeli capital tax under the Israeli Income Tax Ordinance provided (among other conditions) that the seller does not have a permanent establishment in Israel to which the generated capital gain is attributed. However, non-Israeli resident corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a 25% or more interest in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed to be business income.

In addition, the sale of the Shares may be exempt from Israeli capital gain tax under the provisions of an applicable double tax treaty. For example, the Convention Between the Government of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, or the U.S.-Israel Double Tax Treaty, exempts a U.S. resident (for purposes of the U.S.-Israel Double Tax Treaty) from Israeli capital gain tax in connection with the sale, exchange or other disposition of the Shares, provided (among other conditions) that: (i) the U.S. resident owned, directly or indirectly, less than 10% of the voting power of the company at any time within the 12-month period preceding such sale; (ii) the U.S. resident, being an individual, is present in Israel for a period or periods of less than 183 days during the taxable year; and (iii) the capital gain from the sale was not derived through a permanent establishment of the U.S. resident in Israel; however, under the U.S.-Israel Double Tax Treaty, the taxpayer may be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The U.S.-Israel Double Tax Treaty does not relate to U.S. state or local taxes.

In some instances where our shareholders may be liable for Israeli tax on the sale of their Ordinary Shares, the payment of the consideration may be subject to withholding of Israeli tax at source. 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. Specifically, the Israeli Tax Authority ("ITA") may require shareholders who are not liable for Israeli capital gain tax on such sale to sign declarations in forms prescribed by the ITA, provide documents (including, for example, a certificate of residency) or obtain a specific exemption from the ITA to confirm their status as non-Israeli residents (and, in the absence of such declarations or exemptions, the ITA may require the purchaser or any applicable payor of the shares to withhold tax at source).

Payers of consideration for the Ordinary Shares, including the purchaser, the Israeli stockbroker or the financial institution through which the Shares are held, are generally obligated, subject to certain exemptions, to withhold tax upon the sale of Shares at a rate of 25% of the consideration for individuals and corporations.

Upon the sale of traded securities, a detailed return, including a computation of the tax due, must be filed and an advance payment must be paid to the Israeli Tax Authority on January 31 and July 31 of every tax year in respect of sales of traded securities made within the previous six months. However, if all tax due was withheld at source according to applicable provisions of the Israeli Income Tax Ordinance and regulations promulgated thereunder, the aforementioned return need not be filed, provided that (among other conditions) (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed and an advance payment does not need to be made, and (iii) the taxpayer is not obligated to pay Excess Tax (as further explained below). Capital gains are also reportable on annual income tax returns.

***Dividends***

Dividends distributed by a company to a shareholder who is an Israeli resident individual will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will apply if the dividend recipient is a Substantial Shareholder, as defined above, at the time of distribution or at any time during the preceding 12-month period. If the recipient of the dividend is an Israeli resident corporation, such dividend will generally be exempt from Israeli income tax provided that the income from which such dividend is distributed, derived or accrued within Israel.

Dividends distributed by an Israeli resident company to a non-Israeli resident (either an individual or a corporation) are generally subject to Israeli withholding tax on the receipt of such dividends at the rate of 25% (30% if the dividend recipient is a Substantial Shareholder at the time of distribution or at any time during the preceding 12-month period). These rates may be reduced under the provisions of an applicable double tax treaty. For example, under the U.S.-Israel Double Tax Treaty, the following withholding tax rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident: (i) if the U.S. resident is a corporation that holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting share capital of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain types of interest or dividends the tax rate is 12.5%; (ii) if both the conditions mentioned in clause (i) above are met and the dividend is paid from an Israeli resident company's income which was entitled to a reduced tax rate under The Law for the Encouragement of Capital Investments, 1959, the tax rate is 15%; and (iii) in all other cases, the tax rate is 25%. The aforementioned rates under the U.S.-Israel Double Tax Treaty will not apply if the dividend income is attributed to a permanent establishment of the U.S. resident in Israel.

***Excess Tax***

Individual holders who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income including, but not limited to, income derived from dividends, interest and capital gains, exceeding a certain threshold (currently NIS 721,560 for years 2024 through 2027, which amount will be updated annually starting January 1, 2028, based on the change in the Israeli consumer price index) (the "Threshold Amount"). An additional 2% tax applies to "capital income" earned as of January 1, 2025 (including capital gains, dividends, and interest) exceeding the Threshold Amount.

***Estate and Gift Tax***

Israel does not currently impose estate or gift taxes if the Israeli Tax Authority is satisfied that the gift was made in good faith and on condition that the recipient of the gift is not a non-Israeli resident.

***Foreign Exchange Regulations***

Non-residents of Israel who hold our Shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax is generally required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential imposition of currency exchange control has not been eliminated and may be restored at any time by administrative action.

&nbsp;&nbsp;&nbsp;&nbsp;**F.** **Dividends and Paying Agents** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**G.** **Statement by Experts** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**H.** **Documents on Display** 

We are subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements will file reports with the SEC through its electronic data gathering, analysis and retrieval (EDGAR) system. Our securities filings, including this Annual Report and the exhibits thereto, are available electronically through the SEC website (*http://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 will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, we will not be required under the Exchange Act to file annual or other reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

We maintain a corporate website at *www.Scinai.com.* Information contained on, or that can be accessed through, our website does not constitute a part of this annual report. We have included our website address in this annual report solely as an inactive textual reference.

&nbsp;&nbsp;&nbsp;&nbsp;**I.** **Subsidiary Information** 

Not applicable.

**Item 11.** **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position, results of operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments. Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.

***Interest Rate Risk***

 ****

Following the date of this annual report, we do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily of cash and cash equivalents and financial assets at fair value.

Following the date of this annual report, we may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities, if any, of our investments to date, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy to hold such investments to maturity in order to limit our exposure to interest rate fluctuations.

***Foreign Currency Exchange Risk***

 ****

Our foreign currency exposures give rise to market risk associated with exchange rate movements of the U.S. dollar, our functional and reporting currency, mainly against the NIS and the Euro. Although the U.S. dollar is our functional currency, a significate portion of our expenses are denominated in both NIS and Euro. Our NIS and Euro expenses consist principally of payments made to our partners at MPG and UMG, sub-contractors and consultants for pre-clinical trials and other research and development activities as well as payments made to purchase new equipment. We anticipate that a sizable portion of our expenses will continue to be denominated in currencies other than the NIS. If the US. dollar fluctuates significantly against either the NIS or the Euro, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition for the periods under review.

**Item 12.** **DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**

&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Debt Securities** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Warrants and Rights** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Other Securities** 

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;**D.** **American Depositary Shares** 

The Bank of New York Mellon, as depositary, registered and delivered American Depositary Shares, also referred to as ADSs. Each ADS represents 4,000 ordinary shares (or a right to receive 4,000 ordinary shares) deposited with the principal Tel Aviv office of either of Bank Leumi or Bank Hapoalim, as custodian for the depositary. Each ADS also represents any other securities, cash or other property which may be held by the depositary. The depositary's office at which the ADSs are administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon's principal executive office is located at One Wall Street, New York, New York 10286.

**Fees and Expenses**

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| | | |
|:---|:---|:---|
| ***Persons depositing or withdrawing ordinary shares or ADS holders must pay*:** | ***For*:** | ***For*:** |
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | ● | &nbsp;&nbsp;Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates |
| $0.05 (or less) per ADS | ● | &nbsp;&nbsp;Any cash distribution to ADS holders |
| A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs | ● | &nbsp;&nbsp;Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders |
| $0.05 (or less) per ADS per calendar year | ● | &nbsp;&nbsp;Depositary services |
| Registration or transfer fees | ● | &nbsp;&nbsp;Transfer and registration of ordinary shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw ordinary shares |
| Expenses of the depositary | ● | &nbsp;&nbsp;Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars |
| Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | ● | &nbsp;&nbsp;As necessary |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | ● | &nbsp;&nbsp;As necessary |

---

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliates of the depositary and that may earn or share fees or commissions.

**PART II**

**Item 13.** **DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

None.

**Item 14.** **MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

Not applicable

**Item 15.** **CONTROLS AND PROCEDURES**

**Disclosure Controls and Procedures**

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 filings are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025 (the "Evaluation Date"). Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

**Management Annual Report on Internal Control over Financial Reporting** 

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of our principal executive and principal financial officers and effected by our board of directors, management and other personnel 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 and includes those policies and procedures that:

● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;

● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including the CEO and CFO, conducted an evaluation, pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual Report, of its internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on the results of this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2025.

**Changes in Internal Control Over Financial Reporting**

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**Item 16.** **[Reserved]**

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| | |
|:---|:---|
| **Item 16A.** | **AUDIT COMMITTEE FINANCIAL EXPERT** |

---

Our Board of Directors has determined that Mr. Adi Raviv, a member of our Audit Committee, is an audit committee financial expert, as defined under the rules under the Exchange Act, and is independent in accordance with applicable Exchange Act rules and NASDAQ rules.

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| | |
|:---|:---|
| **Item 16B.** | **CODE OF ETHICS** |

---

We have adopted a written code of ethics that applies to our officers and employees, including our principal executive officer, principal financial officer, principal controller and persons performing similar functions as well as our directors. Our Code of Business Conduct and Ethics is posted on our website at *www.Scinai.com*. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report on Form 20-F and is not incorporated by reference herein. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any waivers under our Code of Business Conduct and Ethics.

---

| | |
|:---|:---|
| **Item 16C.** | **PRINCIPAL ACCOUNTANT FEES AND SERVICES** |

---

**Principal Accountant Fees and Services** 

Kesselman & Kesselman, certified public accountants in Israel and a member of PricewaterhouseCoopers International Limited ("PwC Israel"), served as our independent registered public accountants from August 24, 2023 until November 13, 2025. At such time, Ziv Haft, certified public accountants in Israel and a member of BDO ("BDO"), became our independent registered public accountants.

We paid the following fees for professional services rendered by BDO for the year ended December 31, 2025 and to PwC Israel for the year ended December 31, 2024:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
|  | **(in thousands of <br> U.S. dollars)** | **(in thousands of <br> U.S. dollars)** |
| Audit Fees | $107 | $120 |
| Audit-Related Fees | $15 | $18 |
| **Total** | $122 | $138 |

---

"**Audit fees**" are the aggregate fees paid for the audit of our annual financial statements. This category also includes services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the SEC.

"**Audit-related fees**" are the aggregate fees paid for assurance and related services that are reasonably related to the performance of the audit and are not reported under audit fees. These fees primarily include accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.

"**Additional fees**" include fees for professional services rendered by our independent registered public accounting firm for tax compliance, transfer pricing, tax advice on actual or contemplated transactions and Israel innovation authority advisory.

**Audit Committee's Pre-approval Policies and Procedures**

Our audit committee has a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of audit service, audit-related service and tax services that may be performed by our independent accountants.

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| | |
|:---|:---|
| **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.

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| | |
|:---|:---|
| **Item 16G.** | **CORPORATE GOVERNANCE** |

---

Companies incorporated under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on the NASDAQ Capital Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements under Israeli law relating to such matters as the audit committee, the compensation committee and an internal auditor. These requirements are in addition to the corporate governance requirements imposed by the listing rules of the NASDAQ Capital Market and other applicable provisions of U.S. securities laws to which we are subject to (as a foreign private issuer) since the closing of the offering in the U.S. and the listing of the ADSs and warrants on the NASDAQ Capital Market. Under the listing rules of the NASDAQ Capital Market, a foreign private issuer, such as us, may generally follow its home country rules of corporate governance in lieu of the comparable requirements of the listing rules of the NASDAQ Capital Market, except for certain matters including (among others) the composition and responsibilities of the audit committee and the independence of its members within the meaning of the rules and regulations of the SEC.

**NASDAQ Capital Market listing rules and Home Country Practices**

In accordance with Israeli law and practice, and subject to the exemption set forth in Rule 5615 of the listing rules of the NASDAQ Capital Market, we intend to follow the provisions of the Companies Law, rather than the listing rules of the NASDAQ Capital Market, with respect to the following requirements:

*Distribution of certain reports to shareholders.* As opposed to the listing rules of the NASDAQ Capital Market, which require listed issuers to make certain reports, such as annual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders, but to make such reports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt from the SEC's proxy solicitation rules.

*Compensation of officers.* We follow the provisions of the Companies Law with respect to matters in connection with the responsibilities of our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles of association do not require that the independent members of our board of directors, or a compensation committee composed solely of independent members of our board of directors, determine an executive officer's compensation, as is generally required under the listing rules of the NASDAQ Capital Market with respect to the Chief Executive Officer and all other executive officers of a company. Our compensation committee has been established and conducts itself in accordance with the provisions governing the responsibilities of a compensation committee as set forth in the Companies Law. Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and in certain circumstances by our shareholders, as detailed below under the caption "—Shareholder Approval." Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation (including the compensation required to be approved for our Chief Executive Officer) requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with listing rules of the NASDAQ Capital Market. See "— Compensation Committee and Compensation Policy" below.

*Compensation Committee*. Pursuant to the Companies Law, we established a compensation committee as detailed below. Since the consummation of the offering, our board of directors has affirmatively determined that each member of our compensation committee qualifies as "independent" under applicable NASDAQ Capital Market and SEC rules.

*Annual Shareholders Meeting.* The Company shall convene an annual shareholders meeting under the requirements (including required dates) of the Companies Law, rather than as required under rule NASDAQ Capital Market Rule 5620(a).

*Shareholder approval*. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with NASDAQ Capital Market Listing Rule 5635. In particular, under this NASDAQ Capital Market rule, shareholder approval is generally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer's shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is required for, among other things: (a) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (b) extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described below under "Disclosure of personal interests of controlling shareholders and approval of certain transactions," (c) terms of office and employment or other engagement of our controlling shareholder, if any, or such controlling shareholder's relative, which require the special approval described below under "Disclosure of personal interests of controlling shareholders and approval of certain transactions, (d) approval of transactions with Company's Chief Executive Officer with respect to his or hers compensation, whether in accordance with the approved compensation policy of the Company or not in accordance with the approved compensation policy of the Company, or transactions with officers of the Company not in accordance with the approved compensation policy, and (e) approval of the compensation policy of the Company for office holders. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. See also "Description of Share Capital — Acquisitions under Israeli Law — Merger" below.

*Quorum for shareholder meetings*. As permitted under the Companies Law, pursuant to our articles of association, the quorum required for an ordinary meeting of shareholders will consist of one or more shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold, in the aggregate, at least 10% of the voting power of our shares (or, for so long we do not qualify as a foreign private issuer and for only so long as required by the Nasdaq Stock Market, 33 1/3% of our outstanding ordinary shares), (and in an adjourned meeting, any number of shareholders), instead of 33 1/3% of the issued share capital required under the NASDAQ Capital Market corporate governance rules.

Other than the foregoing home country practices, we otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on the NASDAQ Capital Market. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ Capital Market corporate governance rules. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Capital Market may provide less protection to you than what is accorded to investors under the listing rules of the NASDAQ Capital Market applicable to domestic U.S. issuers.

---

| | |
|:---|:---|
| **Item 16H.** | **MINE SAFETY DISCLOSURE** |

---

Not applicable.

---

| | |
|:---|:---|
| **Item 16I.** | **disclosure regarding foreign jurisdictions that prevent inspections** |

---

Not applicable.

---

| | |
|:---|:---|
| **ITEM 16J.** | **INSIDER TRADING POLICIES** |

---

We have adopted an Insider Trading Policy which governs the purchase, sale and other dispositions of our securities by our directors, officers, employees and contractors that is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations and the listing standards of Nasdaq. A copy of our Insider Trading Policy is filed as Exhibit 11.2 to this Annual Report.

---

| | |
|:---|:---|
| **ITEM 16K.** | **CYBERSECURITY** |

---

We operate in the biotechnology sector, which is subject to various cybersecurity risks that could adversely affect our business. We recognize the critical importance of developing, implementing, and maintaining cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. We currently have security measures in place to protect and prevent data loss and other security breaches, including a cybersecurity risk assessment program. Our network infrastructure was designed with cybersecurity in mind, incorporating a range of critical components such as firewalls, intrusion detection and prevention systems, virtual private networks (VPNs), and secure Wi-Fi access points. Additionally, strong authentication mechanisms, encryption protocols, and robust monitoring tools are essential elements for ensuring a secure network infrastructure. These components work together to protect against unauthorized access, data breaches, malware attacks, and other cybersecurity threats.

Our current cybersecurity risk assessment program consists of routine evaluations of our network infrastructure, penetration testing and continuous monitoring of security controls and threats. The program outlines governance, policies and procedures, and technology we use to oversee and identify risks from cybersecurity threats and is informed by previous cybersecurity incidents we have observed within the Company.

Our COO and Quality Unit Manager are responsible for day-to-day assessment and management of risks from cybersecurity threats, including the prevention, mitigation, detection, and remediation of cybersecurity incidents. Our COO is experienced in operating a company which offers cybersecurity services. Our COO and Quality Unit Manager are informed of cybersecurity risks or incidents by our IT manager who regularly monitors our systems to detect cybersecurity incidents or risks.

The Board of Directors is responsible for oversight of risks from cybersecurity threats in conjunction with management. The Board of Directors receives reports and updates from management with respect to the management of risks from cybersecurity threats. Such reports cover the Company's information technology security program, including its current status, capabilities, objectives and plans, as well as the evolving cybersecurity threat landscape. The Board of Directors takes into consideration such reports and updates into its overall risk assessment of the Company.

We leverage the advice of third-party consultants to help us assess and identify risks from cybersecurity threats, including the threat of a cybersecurity incident, and manage our risk assessment program. Among other things, these third-party consultants conduct security audits, penetration testing, and vulnerability assessments to evaluate the strength of our defenses. They also offer expertise in regulatory compliance, helping us ensure that our security measures align with industry standards and legal requirements. Additionally, they provide ongoing monitoring and analysis of emerging threats, allowing us to proactively adapt and strengthen our cybersecurity posture.<sup>1</sup>

We also have policies and procedures to oversee and identify the risks from cybersecurity threats associated with our use of third-party service providers. When engaging with vendors or partners, we prioritize those who demonstrate robust cybersecurity measures and a strong commitment to protecting sensitive data. To mitigate risks associated with third-party providers, we incorporate specific cybersecurity requirements into contracts and service level agreements. These agreements outline expectations regarding data protection, access controls, incident reporting, and compliance monitoring. Furthermore, we implement other mechanisms to enhance security when working with third-party providers, including implementing two-factor authentication. By implementing these measures, we aim to minimize the cybersecurity risks associated with third-party service providers and ensure the protection of our organization's assets and data.

To date, no cybersecurity incident (or aggregation of incidents) or cybersecurity threat has materially affected our results of operations or financial condition. For information on how a cybersecurity threat might affect us, see also *Item 3D.*

 

**PART III**

**Item 17.** **FINANCIAL STATEMENTS**

The Registrant has responded to Item 18 in lieu of responding to this Item.

**Item 18.** **FINANCIAL STATEMENTS**

See the financial statements beginning on page F-1. The following financial statements and financial statement schedules are filed as part of this Annual Report on Form 20-F together with the report of the independent registered public accounting firm:

**Item 19.** **EXHIBITS**

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| **Exhibit No.** | **Exhibit Description** |
| 1.1\* | [Amended and Restated Articles of Association of Scinai Immunotherapeutics Ltd.](ea028360901ex1-1.htm) |
| 2.1 | [Form of Deposit Agreement between the Company Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, incorporated by reference to Exhibit 4.1 to the Registration Statement on Form F-1 filed with the SEC on April 6, 2015.](http://www.sec.gov/Archives/edgar/data/1611747/000121390015002471/ff12014a1ex4i_biondvax.htm) |
| 2.2 | [Specimen American Depositary Receipt (included in Exhibit 2.1).](http://www.sec.gov/Archives/edgar/data/1611747/000121390015002471/ff12014a1ex4i_biondvax.htm) |
| 2.3\* | [Description of Share Capital.](ea028360901ex2-3.htm) |
| 2.4 | [Form of Pre-Funded Warrant, incorporated by reference to Exhibit 4.4 to the Registration Statement on Form F-1/A filed with the SEC on December 14, 2022.](https://www.sec.gov/Archives/edgar/data/1611747/000121390022079815/ea170090ex4-4_biondvax.htm) |
| 2.5 | [Form of Warrant, incorporated by reference to Exhibit 1.3 to Form 6-K submitted with the SEC on September 19, 2023.](https://www.sec.gov/Archives/edgar/data/1611747/000121390023077652/ea185361ex1-3_scinaiimmu.htm) |
| 2.6 | [Form of Pre-Funded Warrant, incorporated by reference to Exhibit 1.2 to Form 6-K submitted with the SEC on September 19, 2023.](https://www.sec.gov/Archives/edgar/data/1611747/000121390023077652/ea185361ex1-2_scinaiimmu.htm) |
| 2.7 | [Form of Placement Agent Warrant, incorporated by reference to Exhibit 1.4 to Form 6-K filed with the SEC on September 19, 2023.](https://www.sec.gov/Archives/edgar/data/1611747/000121390023077652/ea185361ex1-4_scinaiimmu.htm) |
| 4.1 | [2018 Share Incentive Plan, incorporated by reference to Exhibit 4.2 to the Annual Report on Form 20-F filed with the SEC on June 12, 2020.](http://www.sec.gov/Archives/edgar/data/1611747/000121390020014759/f20f2019ex4-2_biondvax.htm) |
| 4.2 | [Compensation Policy, incorporated by reference to Exhibit 4.3 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-3_scinai.htm) |
| 4.3 | [Employment Agreement dated January 20, 2021, between the Company and Mr. Amir Reichman. incorporated by reference to Exhibit 4.4 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022.](https://www.sec.gov/Archives/edgar/data/1611747/000121390022015270/f20f2021ex4-4_biondvax.htm) |
| 4.4 | [Employment Agreement dated September 5, 2018, between the Company and Elad Mark, incorporated by reference to Exhibit 10.10 to the Annual Report on form 10-K filed with the SEC on April 17, 2023.](http://www.sec.gov/Archives/edgar/data/1611747/000121390023030228/f10k2022ex10-10_biondvax.htm) |
| 4.5 | [Service Agreement dated June 20, 2007, between the Company, CFO Direct and Uri Ben-Or, incorporated by reference to Exhibit 10.7 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.](http://www.sec.gov/Archives/edgar/data/1611747/000121390014009164/ff12014ex10vii_biondvax.htm)<br>|
| 4.6 | [Addendum to Service Agreement dated August 31, 2014, between the Company, CFO Direct and Uri Ben-Or, incorporated by reference to Exhibit 10.12 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.](http://www.sec.gov/Archives/edgar/data/1611747/000121390014009164/ff12014ex10xii_biondvax.htm) |
| 4.7 | [Employment Agreement dated August 31, 2014, between the Company and Uri Ben-Or, incorporated by reference to Exhibit 10.13 to the Registration Statement on Form F-1 filed with the SEC on December 29, 2014.](http://www.sec.gov/Archives/edgar/data/1611747/000121390014009164/ff12014ex10xiii_biondvax.htm) |
| 4.8 | [Loan Restructuring Agreement, dated August 9, 2024, between the Company and the European Investment Bank, incorporated by reference to Exhibit 10.12 to the Registration Statement on Form F-1 filed with the SEC on March 4, 2025.](https://www.sec.gov/Archives/edgar/data/1611747/000121390025020296/ea023239201ex10-12_scinai.htm) |
| 4.9 | [Amended and Restated Finance Contract, dated June 20, 2019, as amended on January 11, 2021, August 9, 2022 and November 24, 2023, as further amended and restated on August 21, 2024, between the Company and the European Investment Bank (included in Exhibit 4.8)](https://www.sec.gov/Archives/edgar/data/1611747/000121390025020296/ea023239201ex10-12_scinai.htm) |
| 4.10 | [Lease agreement dated July 10, 2017 between the Company and Unihad BioPark Ltd., incorporated by reference to Exhibit 4.19 to the Form 20-F filed with the SEC on April 30, 2018 (unofficial translation from Hebrew original).](http://www.sec.gov/Archives/edgar/data/1611747/000121390018005179/f20f2017ex4-19_biondvax.htm) |
| 4.11 | [Amendment No. 1 to lease agreement, dated April 29, 2022 (unofficial translation from Hebrew original), incorporated by reference to Exhibit 4.15 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-15_scinai.htm) |
| 4.12 | [Amendment No. 2 to lease agreement, dated June 3, 2023 (unofficial translation from Hebrew original), incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-16_scinai.htm) |
| 4.13 + | [Amendment No. 3 to lease agreement, dated July 10, 2023 (unofficial translation from Hebrew original), incorporated by reference to Exhibit 4.17 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-17_scinai.htm) |
| 4.14 + | [Amendment No. 4 to lease agreement, dated December 15, 2024 (unofficial translation from Hebrew original), incorporated by reference to Exhibit 4.18 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-18_scinai.htm) |
| 4.15 | [Amendment No. 5 to lease agreement, dated December 24, 2024 (unofficial translation from Hebrew original), incorporated by reference to Exhibit 4.19 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](https://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-19_scinai.htm) |
| 4.16\* | [Lease Agreement dated August 11, 2020, between Scinai Biopharma and P L.A.R. Management Assets Ltd. and R. Matry Adv. Attorney Company.](ea028360901ex4-16.htm) |
| 4.17 | [Services Agreement between the Company and Mark Germain, incorporated by reference to Appendix C to the Form 6-K filed with the SEC on April 23, 2019, as amended by Exhibit 99.1 to the Current Report on Form 6-K filed with the SEC on April 12, 2022.](http://www.sec.gov/Archives/edgar/data/1611747/000121390022019422/ea158319ex99-1_biondvaxpharm.htm) |

---

---

| | |
|:---|:---|
| 4.18+ | [License Agreement, dated December 11, 2021, between the Company and Max-Planck-Innovation GmbH, incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022.](http://www.sec.gov/Archives/edgar/data/1611747/000121390022015270/f20f2021ex4-16_biondvax.htm) |
| 4.19+ | [Accompanying Research Collaboration Agreement, dated December 11, 2021, between the Company, Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen, incorporated by reference to Exhibit 4.17 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022.](http://www.sec.gov/Archives/edgar/data/1611747/000121390022015270/f20f2021ex4-17_biondvax.htm) |
| 4.20 + | [Research Collaboration Agreement, dated March 23, 2022, between the Company Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen, incorporated by reference to Exhibit 4.18 to the Annual Report on Form 20-F filed with the SEC on March 28, 2022.](http://www.sec.gov/Archives/edgar/data/1611747/000121390022015270/f20f2021ex4-18_biondvax.htm) |
| 4.21 + | [Form of License Agreement between the Company, Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V and Georg-August-Universität Göttingen Stiftung Öffentlichen Rechts Universitätsmedizin Göttingen, incorporated by reference to Exhibit 10.20 to the Annual Report on form 10-K filed with the SEC on April 17, 2023.](https://www.sec.gov/Archives/edgar/data/1611747/000121390022015270/f20f2021ex4-19_biondvax.htm) |
| 4.22 | [Form of Securities Purchase Agreement, incorporated by reference to Exhibit 1.1 to Form 6-K submitted with the SEC on September 19, 2023.](http://www.sec.gov/Archives/edgar/data/1611747/000121390023077652/ea185361ex1-1_scinaiimmu.htm) |
| 4.23 | [Investment Agreement, between the Company and RK Stone Miami, LLC, dated as of August 19, 2024 ("Stone Investment Agreement"), incorporated by reference to Exhibit 10.21 to the Registration Statement on Form F-1 filed with the SEC on March 4, 2025.](https://www.sec.gov/Archives/edgar/data/1611747/000121390025020296/ea023239201ex10-21_scinai.htm) |
| 4.24 | [Form of Warrant issued in connection with the Stone Investment Agreement, incorporated by reference to Exhibit 10.22 to the Registration Statement on Form F-1 filed with the SEC on March 4, 2025.](https://www.sec.gov/Archives/edgar/data/1611747/000121390025020296/ea023239201ex10-22_scinai.htm) |
| 4.25 | [Standby Equity Purchase Agreement, dated March 3, 2025, between YA II PN Ltd. and the Company, incorporated by reference to Exhibit 99.1 of Form 6-K submitted with the SEC on March 4, 2025.](https://www.sec.gov/Archives/edgar/data/1611747/000121390025020239/ea023303701ex99-1_scinai.htm) |
| 4.26+ | [Binding Option Agreement Concerning the Sale and Transfer of All Quota In PINCELL S.R.L. between Mr. Carlo Pincelli, Mr. Antonino Amato, Mrs. Alessandra Marconi, Mrs. Roberta Lotti, Mr. Brydon Bennett, Ms. Stefania Poli, PinCell S.r.l., Scinai Immunotherapeutics sp. z.o.o. and the Company, dated March 27, 2025, incorporated by reference to Exhibit 4.29 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex4-29_scinai.htm) |
| 4.27 | [Standby Equity Purchase Agreement, dated as of September 10, 2025, between YA II PN, Ltd. and the Company, incorporated by reference to Exhibit 99.1 of Form 6-K submitted with the SEC on September 11, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025086668/ea025695401ex99-1_scinai.htm) |
| 8.1\* | [List of Subsidiaries of the Company.](ea028360901ex8-1.htm) |
| 11.1 | [Code of Conduct, incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed with the SEC on April 17, 2023.](http://www.sec.gov/Archives/edgar/data/1611747/000121390023030228/f10k2022ex14-1_biondvax.htm) |
| 11.2 | [Insider Trading Policy, incorporated by reference to Exhibit 11.2 to the Annual Report on Form 20-F filed with the SEC on May 7, 2025.](http://www.sec.gov/Archives/edgar/data/1611747/000121390025040402/ea023966901ex11-2_scinai.htm) |
| 12.1\* | [Certification of the Chief Executive Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934.](ea028360901ex12-1.htm) |
| 12.2\* | [Certification of the Chief Financial Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934.](ea028360901ex12-2.htm) |
| 13.1\* | [Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, furnished herewith.](ea028360901ex13-1.htm) |
| 13.2\* | [Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, furnished herewith.](ea028360901ex13-2.htm) |
| 15.1\* | [Consent of Ziv Haft, certified public accountants in Israel and a member of BDO, independent registered public accounting firm for the Registrant.](ea028360901ex15-1.htm) |
| 97.1 | [Scinai Immunotherapeutics Policy for Recovery of Erroneously Awarded Compensation, incorporated by reference to Exhibit 97.1 to the Annual Report on Form 20-f-K submitted with the SEC on May 15, 2024](https://www.sec.gov/Archives/edgar/data/1611747/000121390024043560/ea020590801ex97-1_scinai.htm). |
| 101.INS | Inline XBRL Instance Document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

**\*** Filed herewith.

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| | |
|:---|:---|
| **+** | Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful if publicly disclosed. |

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**SIGNATURES**

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

---

| | | |
|:---|:---|:---|
|  | **Scinai Immunotherapeutics Ltd.** | **Scinai Immunotherapeutics Ltd.** |
| Date: April 1, 2026 | By: | /s/ Amir Reichman |
|  |  | Amir Reichman |
|  |  | Chief Executive Officer |

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**SCINAI IMMUNOTHERAPEUTICS LTD.**

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

Index to the Financial Statements

---

| | |
|:---|:---|
|  | **Page** |
| **<u>[Report of Independent Registered Public Accounting Firm PCAOB ID: 1309](#fin_001)</u>** | **F-2** |
| [**<u>Consolidated</u> Balance Sheets**](#fin_002) | **F-4 – F-5** |
| [**<u>Consolidated</u> Statements of Operations**](#fin_003) | **F-6** |
| [**<u>Consolidated</u> Statements of Comprehensive Loss**](#fin_004) | **F-7** |
| [**<u>Consolidated</u> Statements of Changes in Shareholders' Equity**](#fin_005) | **F-8 – F-10** |
| [**<u>Consolidated</u> Statements of Cash Flows**](#fin_006) | **F-11 – F-12** |
| [**Notes to Consolidated Financial Statements**](#fin_007) | **F-13 – F-43** |

---

- - - - - - - - - - - - - -

![](ea028360901_img1.jpg)

**Report of Independent Registered Public Accounting Firm**

To the board of directors and shareholders of Scinai Immunotherapeutic Ltd.

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheets of Scinai Immunotherapeutics Ltd. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statement of operations, comprehensive loss, changes in shareholders' equity and of cash flows for each of the three - years in the period ended December 31, 2025, including 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 as of 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 accounting principles generally accepted in the United States of America.

 ****

Substantial Doubt about 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 1q to the consolidated financial statements, the Company has suffered recurring losses from operations and has incurred cash outflows from operating activities. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1f. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. This matter is also described in the "Critical Audit Matters" section of our report.

**Basis for Opinion** 

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

![](ea028360901_img2.jpg)

![](ea028360901_img1.jpg)

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters 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.

The Company's ability to continue as a going concern

As described above and in Note 1q to the consolidated financial statements, the Company has an accumulated deficit, cash outflows from operating activities and its activities have been funded primarily through offerings of the Company's securities and borrowing. The Company's operations are dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. This dependency will continue until the Company will be able to completely finance its operations by generating revenue from its services and products and to raise funds to support the ongoing advancement of its clinical trials and corporate activities. Also, the Company's board of directors approved a cost saving plan, which is being implemented, to allow the Company to continue its operations and meet its cash obligations. These conditions and events raise substantial doubt about its ability to continue as a going concern.

The principal considerations for our determination that performing procedures related to the Company's ability to continue as a going concern is a critical audit matter are 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 fund its operations for at least one year from the date of issuance of the financial statements. This in turn led to a high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with our overall opinion on the financial statements. Our audit procedures to evaluate the significant judgments and assumptions made by management included, among others, assessing the reasonableness of the forecasted revenue and operating expenses and, comparing management forecasted amounts to evaluate whether those forecasted amounts approximated the ultimate actual results. We assessed the adequacy of the Company's going concern disclosures included in Note 1q to the consolidated financial statements.

/s/ *Ziv Haft*

Certified Public Accountants (Isr.)

BDO Member Firm

Tel-Aviv, Israel

March 31, 2026

![](ea028360901_img3.jpg)

**SCINAI IMMUNOTHERAPEUTICS LTD.** 

**CONSOLIDATED BALANCE SHEETS**

**U.S. dollars in thousands (except share and per share data)**

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| ASSETS |  |  |
| CURRENT ASSETS: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $1661 | $1964 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 150 | 131 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other receivables | 170 | 213 |
| &nbsp;&nbsp;&nbsp;Trade receivables | 73 | 83 |
| Total current assets | 2054 | 2391 |
| NON-CURRENT ASSETS: |  |  |
| &nbsp;&nbsp;&nbsp;Property, plant and equipment, net | 7793 | 9189 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 1779 | 1868 |
| Total non-current assets | 9572 | 11057 |
| Total assets | $11626 | $13448 |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED BALANCE SHEETS**

**U.S. dollars in thousands (except share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| TOTAL LIABILITIES AND EQUITY (CAPITAL DEFICIENCY) |  |  |
| CURRENT LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Trade payables | $407 | $376 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 329 | 424 |
| &nbsp;&nbsp;&nbsp;Other payables | 849 | 1006 |
| Total current liabilities | 1585 | 1806 |
| NON-CURRENT LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Warrants liability | - | 3 |
| &nbsp;&nbsp;&nbsp;Loan from others | 294 | 260 |
| &nbsp;&nbsp;&nbsp;Non-current operating lease liabilities | 1644 | 1402 |
| Total non-current liabilities | 1938 | 1665 |
| CONTINGENT LIABILITIES AND COMMITMENTS |  |  |
| SHAREHOLDERS' EQUITY: |  |  |
| Ordinary shares of no par value: Authorized: 100,000,000,000 shares at December 31, 2025 and 40,000,000,000 at December 31, 2024; Issued and outstanding 13,872,899,584 shares at December 31, 2025 and 3,411,983,584 shares at December 31, 2024 | - | - |
| Preferred shares, no par value; Authorized: 1,000 shares at December 31, 2025 and 1,000 shares at December 31, 2024 (redemption amount of $34,000); Issued and outstanding: 1,000 shares at December 31, 2025 and 1,000 shares at December 31, 2024. | 5627 | 5627 |
| Additional paid-in capital | 130062 | 123629 |
| Accumulated deficit | (125846) | (117539) |
| Accumulated other comprehensive loss | (1740) | (1740) |
| Total shareholders' equity | 8103 | 9977 |
| Total liabilities and shareholders' equity | $11626 | $13448 |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**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** |
| Revenues | 1311 | 658 | - |
| Cost of revenues | (3963) | (1238) | - |
| Gross profit (loss) | (2652) | (580) | - |
| Research and development expenses, net | (2369) | (5532) | (5210) |
| Marketing, general and administrative expenses | (2521) | (2526) | (4505) |
| Other income | - | - | 9 |
| Total operating expenses | (4890) | (8058) | (9706) |
| Total operating loss | (7542) | (8638) | (9706) |
| Gain on troubled debt restructuring | - | 14759 | - |
| Financial income (expenses) net, | (765) | (1325) | 3206 |
| Net Income (Loss) | (8307) | 4796 | (6500) |
| Net loss (Income) per ordinary share attributable to shareholders, basic and diluted | - | - | 0.004 |
| Weighted average number of shares used in computing net loss (income) per share attributable to ordinary shareholders, basic and diluted | 9339460965 | 3225472266 | 1562627495 |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

**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** |
| Net income (Loss) | $(8307) | $4796 | $(6500) |
| Other comprehensive income: |  |  |  |
| Foreign currency translation adjustments | - | - | 267 |
| Total comprehensive income (Loss) | $(8307) | $4796 | $(6233) |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

**U.S. dollars in thousands (except share and per share data)** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Ordinary shares** | **Ordinary shares** | **Preferred shares** | **Preferred shares** | | | | |
|  | **Number** | **Amount** | **Number** | **Amount** | **Additional<br> paid-in**<br> **capital** | **Accumulated<br> comprehensive**<br> **loss** | **Accumulated<br> equity**<br> **(deficit)** | **Total<br> shareholders'**<br>**equity (deficit)** |
| Balance as of January 1, 2023 | 989290784 | $\* |  | $&nbsp;&nbsp;&nbsp;&nbsp; - | 116082 | $(2007) | $(115835) | $(1760) |
| Exercise of warrants | 584015200 | &nbsp;&nbsp;&nbsp;&nbsp;- |  | - | 801 | - | - | 801 |
| Vested RSU's | 8108400 | - |  | - | - | - | - | - |
| Issuance of warrants and shares, net of issuance costs of $86 | 160000000 | - |  | - | 1086 | - | - | 1086 |
| Reclassification of warrant's liability to equity |  | - |  |  | 398 | - | - | 398 |
| Share-based compensation |  | - |  | - | 869 | - | - | 869 |
| Shares issued for services | 115755600 | - |  | - | 270 | - | - | 270 |
| Other comprehensive income |  | - |  | - | - | 267 | - | 267 |
| Net Income (Loss) | - | - |  | - | - | - | (6500) | (6500) |
| Balance as of December 31, 2023 | 1857169984 | - |  | $- | $119506 | $(1740) | $(122335) | $(4569) |

---

\* Ordinary shares have no par value

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

**U.S. dollars in thousands (except share and per share data)** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Ordinary shares** | **Ordinary shares** | **Preferred shares** | **Preferred shares** | | | | |
|  | **Number** | **Amount** | **Number** | **Amount** | **Additional<br> paid-in**<br> **capital** | **Accumulated<br> comprehensive**<br> **loss** | **Accumulated<br> equity**<br> **(deficit)** | **Total<br> shareholders'**<br> **equity (deficit)** |
| Balance as of January 1, 2024 | 1857169984 | \* | - | - | 119506 | $(1740) | $(122335) | $(4569) |
| Vested RSU's | 63572800 | - | - | - | - | - | - | - |
| Exercise of warrants, net of issuance costs of $263 | 1042620000 | - | - | - | 1441 | - | - | 1441 |
| Exercise of prefunded warrant | 448620800 | - | - | - |  | - | - | - |
| Loan conversion into preferred shares | - | - | 1000 | 5627 |  | - | - | 5627 |
| Share-based compensation |  | - |  | - | 682 | - | - | 682 |
| Issuance of prefunded warrants |  | - |  | - | 2000 | - | - | 2000 |
| Net Income (Loss) | - | - | - | - | - | - | 4796 | 4796 |
| Balance as of December 31, 2024 | 3411983584 | - | 1000 | 5627 | 123629 | (1740) | (117539) | 9977 |

---

\* Ordinary shares have no par value

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

**U.S. dollars in thousands (except share and per share data)** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Ordinary shares** | **Ordinary shares** | **Preferred shares** | **Preferred shares** | | | | |
|  | **Number** | **Amount** | **Number** | **Amount** | **Additional<br> paid-in**<br> **capital** | **Accumulated<br> comprehensive**<br> **loss** | **Accumulated<br> equity**<br> **(deficit)** | **Total<br> shareholders'**<br> **equity (deficit)** |
| Balance as of January 1, 2025 | 3411983584 | \* | 1000 | $5627 | $123629 | (1, 740) | (117539) | 9977 |
| Vested RSU's | 32816000 | - | - | - | - | - | - | - |
| Exercise of prefunded warrant | 1445128000 | - | - | - |  | - | - | - |
| Loan conversion into preferred shares | - | - |  | - |  | - | - | - |
| Share-based compensation |  | - |  | - | 304 | - | - | 304 |
| Issuance of ordinary shares | 8982972000 | - |  | - |  | - | - | 6129 |
| Net Income (Loss) | - | - | - | - |  | - | (8307) | (8307) |
| Balance as of December 31, 2025 | 13872899584 |  | 1000 | $5627 | 130062 | (1740) | (125846) | 8103 |

---

\* Ordinary shares have no par value

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**U.S. dollars in thousands** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2025** | **2024** | **2023** |
| <u>Cash flows from operating activities:</u> |  |  |  |
| Net income (loss) | $(8307) | $4796 | $(6500) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |  |  |
| Depreciation of property, plant and equipment | 1421 | 1649 | 514 |
| SEPA commitment fees | 359 | - | - |
| Financial (income) expense related to loan from others | 33 | 1278 | 401 |
| Revaluation of warrants | (3) | (93) | (4140) |
| Gain on troubled debt restructuring | - | (14759) | - |
| Share-based compensation | 303 | 682 | 1139 |
| Decrease (increase) in trade receivables | 10 | (83) | - |
| Decrease (increase) in other receivables | 43 | 224 | (290) |
| Changes in operating lease right-of-use assets | 89 | 284 | 43 |
| Increase (decrease) in trade payables | 31 | (156) | (150) |
| Changes in operating lease liabilities | 147 | (314) | (58) |
| Increase (decrease) in other payables | (157) | 157 | (341) |
| Net cash used in operating activities | (6031) | (6335) | (9382) |
| <u>Cash flows from investing activities:</u> |  |  |  |
| Purchase of property, plant and equipment | (24) | (12) | (637) |
| Net cash used in investing activities | $(24) | $(12) | $(637) |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**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** |
| <u>Cash flows from financing activities:</u> |  |  |  |
| Proceed from exercise of warrants, net | $— | $1441 | $947 |
| Proceeds from issuance of shares, net |  | 2000 | 139 |
| Proceeds from issuance of ordinary shares for SEPA holders, net | 5770 | - | - |
| Net cash provided by financing activities | 5770 | 3441 | 1086 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1 | (9) | (272) |
| Increase (decrease) in cash, cash equivalents and restricted cash | (284) | (2915) | (9205) |
| Cash, cash equivalents and restricted cash at beginning of year | 2095 | 5010 | 14215 |
| Cash, cash equivalents and restricted cash at end of year | $1811 | $2095 | $5010 |
| <u>Supplementary disclosure of cash flows activities:</u> |  |  |  |
| (1) Cash paid during the year for: |  |  |  |
| Interest | $- | $143 | $833 |
| (2) Non-cash transactions: |  |  |  |
| Recognition of right-of-use assets and lease liabilities upon exercise of lease extension option | - | 952 | - |
| Reclassification of warrants liability to equity | - | - | 398 |
| Shares issued for SEPA financing agreement | 150 |  |  |
| Loan convert into preferred shares | - | 5627 | - |
| Exercise of warrants liability into shares | $- | $- | $801 |
| <u>Reconciliation of cash, cash equivalents and restricted cash:</u> |  |  |  |
| Cash and cash equivalents | $1661 | $1964 | $4870 |
| Restricted cash | 150 | 131 | 140 |
| Cash, cash equivalents and restricted cash | $1811 | $2095 | $5010 |

---

The accompanying notes are an integral part of the condensed consolidated financial statements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 1:- GENERAL**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Scinai Immunotherapeutics LTD (the "Company"), operations focus on: an innovative R&D and a Contract Development and Manufacturing Organization ("CDMO") (please see section e). The R&D focuses on: (i) managing and guiding a research contract with the Max Planck Gesellschaft ("MPG"), the parent organization of the Max Planck Institute for Multidisciplinary Sciences, and the University Medical Center Gottingen ("UMG"), both located in Germany; and (ii) developing licensed drug candidates throughout the pre-clinical and clinical steps required for drug approval. The CDMO focuses on providing drug development and manufacturing services to early stage drug development projects. The Company was incorporated on July 21, 2003, in Israel and started its activity on March 31, 2005. In June 2007, the Company completed an initial public offering of its ordinary shares on the Tel Aviv Stock Exchange (TASE) and then voluntarily delisted from the TASE in January 2018. In May 2015, the Company completed an initial public offering of American Depositary Shares ("ADS") on the Nasdaq Capital Market. The Company's principal executive offices, one of its manufacturing sites and main laboratories are located in Jerusalem, Israel. (note 2K). In February, 2026 the Company acquired manufacturing capacity an additional manufacturing site in Yavne, Israel (note 17). Since October 2023, Israel has been in a state of war on multiple fronts involving the Gaza Strip and other countries and regions in the Middle East, including most recently the Islamic Republic of Iran. In June 2025, Israel launched a military campaign targeting Iran's rapidly advancing nuclear weapons program, ballistic missile program and related military infrastructure assessed to be posing an imminent and existential threat. The campaign ended with U.S. military operation, which included the bombing of Iran's primary nuclear facility. Tensions between the U.S. and Israel, on one side, and Iran, on the other side, continued, and on February 28, 2026, the U.S. and Israel launched another campaign of attacks. The full outcome of this new military campaign, which included the killing of the second Supreme Leader of Iran, Ayatollah Ali Khamanei, is not yet fully known, and could have adverse impacts on our ongoing operations in Israel, as well as our results of operations. As a result of the conflict, some of the Company's employees were called to reserve military duty, leading to temporary workforce disruptions. In addition, the unstable environment made capital raising efforts more challenging

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. On December 22, 2021, the
 Company signed an exclusive, worldwide, license agreement with MPG and UMG for the development and commercialization of an innovative
 COVID-19 VHH antibody fragment therapy and an accompanying research collaboration agreement with MPG and UPG in support of the such
 COVID-19 nanoAb. The agreements became effective January 1, 2022 and provide for an upfront payment, development and sales milestones
 and royalties based on sales and sharing of sublicense revenues. Following a joint decision by the Company, due to changing market
 conditions for COVID therapeutics, MPG and UMG through their Joint Steering Committee, the project and the accompanying research
 collaboration agreement were subsequently terminated, and the related patents were abandoned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. On March 23, 2022, the
 Company entered into a Research Collaboration Agreement ("RCA") with MPG and UMG with an initial term of five years.
 The agreement covers the discovery, selection, and characterization of nanoAbs (single domain VHH antibody fragments) directed at
 several molecular targets implicated in diseases where the Company believes there is significant unmet need. The Company aims to
 address these unmet needs by harnessing the unique attributes of nanoAbs, such as their strong binding affinity, stability at elevated
 temperatures, and ability to support more effective and convenient routes of administration. The molecular targets and related diseases
 were identified through a consulting project with the global healthcare management consulting firm L.E.K., and they correspond to
 validated targets of currently marketed monoclonal antibodies for conditions such as psoriasis, psoriatic arthritis, asthma, atopic
 dermatitis, and COPD. Under the RCA, the Company holds an exclusive option to enter into a license agreement with MPG and UMG for
 the development and commercialization of each of the nanoAbs covered by the collaboration.

**SCINAI IMMUNOTHERAPEUTICS LTD.** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 1:- GENERAL (Cont).**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. On June 5, 2023, the Company announced
 that as part of our ongoing broad-based collaboration with the Max Planck Society and the
 University Medical Center Gottingen (UMG), it signed an exclusive worldwide license agreement
 to develop and commercialize VHH antibodies (nanoAbs) targeting Interleukin-17 (IL-17) as
 treatments for all potential indications, starting with psoriasis and psoriatic arthritis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. On September 6, 2023, the Company announced the launch of its CDMO business, Scinai Bioservices (now renamed to Scinai Biopharma Services), focused on providing end-to-end development and manufacturing services for drug development programs requiring aseptic processing and biologic drug substance process development and analytics, with an emphasis on early-stage programs and GMP manufacturing for clinical trials. Since inception, the CDMO has secured multiple customer engagements, including both research and GMP manufacturing projects, and has built a growing pipeline of repeat and new clients, primarily from Israel and the U.S. biotech sector. The Company continues to expand its commercial activity, with additional contracts under negotiation and increasing utilization of its development and manufacturing capabilities. The CDMO business is still in its early stages, and its success is dependent on contracting with additional clients, which is not certain, could take some time and may require additional funds to finance such operations in the interim which may be difficult to achieve. However, in March 2026, the Company engaged an independent external valuation firm to perform an impairment test of its CDMO facility in accordance with ASC 360 as of December 31, 2025. Based on this analysis, which considered the Company's current operations and projected future cash flows, the carrying value of the CDMO facility was determined to be recoverable and no impairment was identified. Accordingly, management believes that the carrying value of the CDMO facility is appropriate as of the reporting date. In December 2024, the company established a U.S.-based subsidiary for the CDMO business unit operating under the name Scinai Bioservices Inc. For the year ended December 31, 2025, revenues of approximately $502 were generated from activities related to this subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. On March 24, 2025, the company acquired a Polish shell company without any operations or net assets, Scinai Immunotherapeutics Sp ó łka z ograniczoną odpowiedzialno ś cią, for total consideration of $1 as to serve as our wholly-owned subsidiary in Poland and as an applicant for potential grants under programs established by the Polish government.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. On March 27, 2025, the Company entered into a binding option agreement with the shareholders of PinCell S.r.l. ("PinCell"), pursuant to which the Company obtained an exclusive and irrevocable option to acquire 100% of the fully diluted share capital of PinCell, an Italian biotechnology company developing PC111, a fully human monoclonal antibody targeting soluble Fas Ligand for the treatment of severe dermatological conditions, including pemphigus and Stevens-Johnson Syndrome/Toxic Epidermal Necrolysis (SJS/TEN). In connection with the transaction, the Company's wholly owned Polish subsidiary was established and submitted an application for €12 million of non-dilutive funding under the European Funds for a Modern Economy (FENG) program to support further development of PC111. PC111 has received Orphan Drug Designation from the EMA for pemphigus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. Under the terms of the option agreement, the Company was granted the right to acquire 100% of the fully diluted share capital of PinCell for total consideration of $200. The Company paid $50 upon signing and the remaining $150 during 2025. The option is exercisable upon the satisfaction of certain conditions, including either (i) receipt of non-dilutive grant funding of at least €11 million by the Company's Polish subsidiary, or (ii) securing at least $3 million of dedicated funding for the development of PC111. If the Company elects not to proceed with the acquisition, or if the option expires unexercised, an additional $50 cancellation fee is payable. The upfront payment and potential cancellation fee represent payments for in-process research and development ("IPR&D") with no alternative future use. Accordingly, these amounts were expensed as incurred as research and development expenses. During 2025, the Company recognized total research and development expenses of $250 in connection with this arrangement and recorded a liability of $50 as of December 31, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. On June 5, 2025, the Company received
 clearance from the Italian government under the Golden Power regulation (Law Decree No. 21/2012)
 for the potential acquisition of PinCell, which was a condition to the transaction.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 1:- GENERAL (Cont).**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. On September 11, 2025, following the rejection of the initial grant application and while an appeal was pending, the parties entered into a first amendment to the option agreement, pursuant to which the deadline for fulfillment of the option conditions was extended to February 28, 2026 and the deadline for exercise of the option was extended to March 31, 2026. The amendment also revised the timing of payment of the remaining $150 option consideration into two installments of $75 each.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. As of December 31, 2025, the initial grant application submitted under
the FENG program and the subsequent appeal were not successful. Following the rejection of the appeal in November 2025, the Company engaged
with Pincell regarding a revised funding strategy. On March 30, 2026, the Company submitted a revised application under the FENG program,
incorporating structural enhancements to the project design. The Company expects a decision on the revised application in July 2026. There
can be no assurance that such application will be approved or on what terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. On March 3, 2025, the Company entered into the Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. ("YA"), pursuant to which YA has committed to purchase up to $10.0 million of ADSs, or the Commitment Amount, at the company's direction from time to time, subject to the restrictions and satisfaction of the conditions in the SEPA, during the period commencing on the date of execution of the SEPA until the earlier of (i) the 36-month anniversary of the date of execution of the SEPA, and (ii) YA's purchase of the total Commitment Amount under the SEPA, such period the Commitment Period. Pursuant to the terms of the SEPA, the Company issued 28,784 ADSs (the "Commitment Shares") to YA as consideration for its irrevocable commitment to purchase the Advance Shares under the SEPA. In connection with the SEPA, the Company recognized issuance-related costs of approximately $150, which were recorded as finance costs. Under the terms of the SEPA, each drawdown (an "Advance") is made at a purchase price equal to 97% of the lowest daily volume-weighted average price ("VWAP") during the three consecutive trading days following the delivery of each Advance Notice. The Company may include a floor price in each Advance Notice to set a minimum acceptable price per ADS.

The Company filed a registration statement on Form F-1 to register the resale of up to 3,022,796 ADSs issuable to YA under the SEPA from time to time during the Commitment Period (including the Commitment Shares), subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, if and when the Company determine to sell additional ADSs to YA under the SEPA.YA has no right to require the company to sell any ADSs to YA, but YA is obligated to make purchases of the ADSs as directed by the company, subject to the restrictions and satisfaction of conditions set forth in the Purchase Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m. In March 24, 2025, the Company delivered an Advance Notice for 31,746 ADSs and thereafter delivered the ADSs, and on March 27, 2025, the Company received gross proceeds of approximately $104.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n. In June 2025, the Company raised $1,492 in gross proceeds through drawdowns under the Purchase Agreement. The funding was executed at a volume-weighted average price of approximately $2.9 per ADS, reflecting a 3% discount to the market price at the time. As part of this transaction, the Company issued 511,690 ADSs.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 1:- GENERAL (Cont).**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o. In July and August 2025, the Company raised $4,203 in proceeds through drawdowns under the Standby Equity Purchase Agreement with Yorkville Advisors. The capital raise was executed at a volume-weighted average price of approximately $2.57 per ADS, reflecting a 3% discount to market price at the time of sale. As part of this transaction, the Company issued 1,638,062 ADSs.]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. On September 10, 2025, the Company entered into a Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. ("YA"), Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to YA from time to time during the 36 months following the execution of the SEPA (each such occurrence, an "Advance") up to $15.0 million (the "Commitment Amount") of the Company's American Depositary Shares (the "ADSs"), each representing 4,000 ordinary shares, no par value, of the Company ("Ordinary Shares"), subject to the restrictions and satisfaction of the conditions in the SEPA. As consideration for Yorkville's commitment, the Company agreed to a commitment fee of $108,000, of which 50% was paid via the issuance of 35,461 ADSs upon signing, and the remaining 50% is payable in cash upon the earlier of the first Advance or 90 days following SEC effectiveness of the related Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q. As of December 31, 2025, the Company's cash and cash equivalents totaled $1,661. In the year ended December 31, 2025, the Company had an operating loss of $7,542 and negative cash flows from operating activities of $6,081. The Company's current cash and cash equivalents
position is not sufficient to fund the Company's planned operations for at least one year from the filing date of the financial
statements. These factors raise substantial doubt about the Company's ability to continue as a going concern. The ability to continue
as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they become due. While the Company has successfully raised funds in the past, there is no
assurance that it will be able to do so in the future. The inability to borrow or raise sufficient funds on commercially reasonable terms,
would have serious consequences on the Company's financial condition and results of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r. The Company's current operating
 budget includes various assumptions concerning the level and timing of cash receipts and
 cash outlays for operating expenses and capital expenditure. The Company is planning to finance
 its operations from its existing working capital resources and additional sources of capital
 and financing that are in the advanced planning phase. In addition, the Company has implemented
 a cost-saving plan intended to reduce operating expenses and extend its cash runway. However,
 there is no assurance that additional capital and/or financing will be available to the Company,
 and even if available, whether it will be on terms acceptable to the Company or in amounts
 required.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s. The accompanying financial statements
 have been prepared assuming the Company will continue as a going concern, which contemplates
 the realization of assets and liabilities and commitments in the normal course of business.
 The financial statements for the year ended December 31, 2025, do not include any adjustments
 to reflect the possible future effects on the recoverability and classification of assets
 or the amounts and classification of liabilities that may result from uncertainty related
 to the Company's ability to continue as a going concern.

**SCINAI IMMUNOTHERAPEUTICS LTD.** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Basis of presentation of the financial statements:

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"), as applicable to annual reporting.

The Company qualified as a "foreign private issuer" as defined under Rule 3b-4 of the Securities Exchange Act of 1934, as amended. Accordingly, The Company is subject to the reporting requirements applicable to foreign private issuers and is not required to file financial statements with the SEC as frequently or as promptly as U.S. domestic issuers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Use of estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates and assumptions relate to impairment of long-lived assets and the Fair Value of financial Instruments. The Company's management believes that the estimates, judgment 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 at the dates of the financial statements, and the reported amount of expenses during the reporting periods. Actual results could differ from those estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers.

*CDMO Services*

Under its CDMO agreements, the Company provides a combination of services, which may include:

● **Manufacturing services**: The Company utilizes its facilities and equipment to manufacture pharmaceutical products in accordance with customer specifications. Customers typically own the intellectual property related to the active pharmaceutical ingredient (API) or drug substance (DS) and its formulation. The Company procures raw materials, and in certain projects develops or optimizes manufacturing processes and related analytical methods. The Company then performs cGMP-compliant manufacturing, including formulation, aseptic fill and finish, in-process controls, and release testing for clinical trial materials.

● **Quality assurance and control**: The Company applies its quality management system to ensure compliance with applicable regulatory requirements and performs quality control testing, including sterility and release testing, as required.

● **Process and analytical method development**: The Company assists customers in developing or optimizing manufacturing processes and analytical methods necessary to meet product specifications and regulatory requirements.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

Under its CDMO agreements, the Company provides a combination of services, which may include process and analytical method development, manufacturing of drug substance and drug product, aseptic fill and finish, quality control and quality assurance activities, and access to manufacturing infrastructure.

The Company evaluates each contract to identify the promised goods and services and determine whether they represent distinct performance obligations. Revenue is recognized in a manner that depicts the transfer of control of the relevant goods or services to the customer.

For contracts or performance obligations satisfied over time, revenue is recognized over time using a method that reflects the progress toward completion, which may include achievement of contractual milestones or other measures of progress, as appropriate. Amounts billed in advance of performance are recorded as contract liabilities and recognized as revenue as the related performance obligations are satisfied.

For contracts or performance obligations satisfied at a point in time, revenue is recognized when control of the related product or service is transferred to the customer, which may occur upon delivery, completion of agreed manufacturing or testing activities, or other contractual acceptance points, depending on the terms of the arrangement

 

*Licensing agreement*

The Company has one license agreement. In this license agreement, the Company has identified one performance obligation: grant of the license and use of its IP. The grant of the license and use of its IP performance obligation is considered to be a right to use IP in accordance with ASC 606. Therefore, revenue is recognized at a point in time, upon transfer of control over the license to the licensee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Functional currency:

Effective July 1, 2023, the Company changed its functional currency to the U.S. dollar ("dollar", "USD" or "$") from the New Israeli Shekel ("NIS"). This change was based on an assessment by Company management that the dollar is the primary currency of the economic environment in which the Company operates, due to the starting of the company new business CDMO, including engaging in related agreements with suppliers and customers and the prospect markets it is intended to reach which operate mainly in USD. Accordingly, the functional and reporting currency of the Company in the year ended December 31, 2023, financial statements is the U.S. dollar. The change in functional currency was accounted for prospectively from such date.

In applying the change in reporting currency, all assets and liabilities of the Company's operations were translated from their NIS functional currency into U.S. dollars using the exchange rates in effect on the balance sheet date, and shareholders' equity was translated at the historical rates. Opening shareholders' equity on August 1, 2018, has been translated at the historic rate on that date and any other movements in shareholders' equity during the period from August 1, 2018 to December 31, 2022 were translated using the appropriate historical rates at the date of the respective transaction. All other revenues, expenses and cash flows were translated at the average rates during the reporting periods presented. The resulting translation adjustments are reported under comprehensive income as a separate component of shareholders' equity.

**SCINAI IMMUNOTHERAPEUTICS LTD.** 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Comprehensive income:

The Company accounts for comprehensive income in accordance with ASC 220, "Comprehensive Income". Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by and distributions to owners. For further details see note 2d.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Cash equivalents:

Cash equivalents are short-term highly liquid deposits that are readily convertible to cash with original maturities of three months or less, at the date acquired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. Restricted cash:

Restricted cash are deposits with original maturities of three months or less and are used as security for the Company's Bank Guarantee. Restricted cash amounted to $150 as of December 31, 2025, and $131 as of December 31, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. Property, plant and equipment:

Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any related investment grants, excluding day-to-day servicing expenses.

Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:

---

| | |
|:---|:---|
|  | **%** |
| Laboratory equipment | 15 - 33 |
| Office, furniture and equipment | 6 - 33 |
| Computers and Cars | 20 - 33 |
| Leasehold improvements | (\*)10 |
| Manufacturing plant | (\*\*)10-27 |

---

---

| | |
|:---|:---|
| (\*) | Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or the expected life of the improvement.<br>As a result of exercising the option to extend the lease period on December 24, 2024, the company revaluated the useful life of the Leasehold improvements and Manufacturing plant to be in accordance with the lease period. (note 6). |

---

(\*\*) As of April 2024, the manufacturing plant has completed its validation process, which enabled the commencement of production activities. Accordingly, the depreciation of the manufacturing plant has begun. And will be recognized over its useful life of 8 years.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. 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 an asset may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the assets are expected to generate are less than the carrying value of the assets, the Company reduces the carrying amount of the assets through an impairment charge, to their estimated fair values. The majority of our fixed assets are concentrated with our new CDMO facility. Our ability to generate positive cashflows from such plant may impact the recoverability of such assets and may trigger future impairment to such plant. During the years ended December 31, 2025 and 2024, no impairment was recognized.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. Government grants:

The Company received royalty-bearing grants from the Israel Innovation Authority ("IIA") for approved research and development projects and, in return, undertook to pay royalties amounting to 3%-5% on the revenues derived from sales of products or services developed in whole or in part using these grants. These grants are recognized when the Company becomes entitled to them, based on the costs incurred in accordance with the terms of the relevant agreement. The grants are recorded as a deduction from research and development expenses. The Company records a liability for royalties payable to the IIA upon recognition of revenues from products or services developed using IIA-funded technology. The royalty obligation is calculated based on the applicable royalty rate applied to such revenues.

During 2025, the company deducted $64 in connection with such grants from the R&D expenses. For the year ended December 31, 2025 and 2024, the Company received $150 and $358 from the IIA. (note 8)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. Research
and development expenses:

Research and development expenses net of grants, are recognized in the statements of operations when incurred. Research and development expenses consist of personnel costs (including salaries, benefits and share-based compensation), materials, consulting fees and payments to subcontractors, costs associated with obtaining regulatory approvals and executing pre-clinical and clinical studies. In addition, research and development expenses include overhead allocations consisting of various administrative and facilities related costs. The company charges research and development as incurred.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

In accordance with the agreement with MPG disclosed in note 1b, the Company issued 15,000 ADSs at no cost to MPG as an upfront payment for the license. The ADSs are restricted for a period of three years. The Company evaluated the fair value of the license at $209. The fair value was calculated by an independent valuation, at a discount rate of 31% based on the following assumptions:

---

| | |
|:---|:---|
| Stock price | 1.48 |
| Variance | 150.0% |
| Risk free interest | 1.0% |

---

The fair value of the license in the amount of $209 was recorded as expense in the statement of operating income for the year ended 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. Share-based
compensation:

The Company accounts 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 an option-pricing model. The value of the award is recognized as an expense over the requisite service periods, which is the vesting period of the respective award, on a straight-line basis when the only condition to vesting is continued service.

The Company has selected the binomial option-pricing model as the most appropriate fair value method for its option awards. The Binomial model considers variables such as volatility, dividend yield rate, and risk-free interest rate and also allows for the use of dynamic assumptions and considers the contractual term of the option, and the probability that the option will be exercised prior to the end of its contractual life. The fair value of restricted shares unit is based on the closing market value of the underlying shares at the date of grant. The Company estimates the forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m. Severance
pay and retirement plans:

The majority of the Company's employees who are Israeli citizens have subscribed to Section 14 of Israel's Severance Pay Law, 5723-1963 (the "Severance Pay Law"). Pursuant to Section 14 of the Severance Pay Law, 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 made to employees in accordance with this section release the Company from any future severance liabilities with respect to such employees. Neither severance pay liability nor severance pay fund under Section 14 of the Severance Pay Law is recorded on the Company's balance sheets. Severance expense for the years ended December 31, 2025, 2024 and 2023, amounted to $161, 163$ and $182, respectively.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n. Fair
value of financial instruments:

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data are available.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. The Company measures warrants liability at fair value classified within Level 3. (note 4)

The carrying amounts of cash and cash equivalents, restricted cash, trade receivables, prepaid expenses and other receivables, trade payables and other current payables approximate their fair value due to the short-term maturity of such instruments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o. Leases:

The Company accounts for leases according to ASC 842, "Leases". The Company determines if an arrangement is a lease and the classification of that lease at inception. The Company elected the practical expedient for lease agreements with a term of twelve months or less and does not recognize right-of-use ("ROU") assets and lease liabilities in respect of those agreements. The Company also elected the practical expedient to not separate lease and non-lease components for its leases.

An ROU asset represents the right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease agreement. An ROU asset is measured based on the discounted present value of the remaining lease payments, plus any initial direct costs incurred and prepaid lease payments, excluding lease incentives. The lease liability is measured at lease commencement date based on the discounted present value of the remaining lease payments. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate ("IBR") based on the information available at commencement date in determining the present value of lease payments. The Company's IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend the lease.

Payments under the Company's lease arrangements are primarily fixed, however, and certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease right-of-use assets and liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. Contingencies:

The Company is currently involved in various commitment and contingent liabilities. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. (see Note 8).

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;q. Income
taxes:

The Company accounts for income taxes in accordance with ASC 740, "Income Taxes", which 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. The Company provides a valuation allowance, to reduce deferred tax assets to their estimated realizable value, if needed.

ASC 740 offers a two-step approach for 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 no liability for unrecognized tax benefits was recorded as a result of ASC 740.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;r. Basic
and diluted net loss (income) per share:

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per Share. Basic net (income) loss per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period, including pre-funded warrants and fully vested RSUs.

The Company applies the two-class method in calculating net income (loss) per ordinary shares. In order to determine the net income (loss) attributable to ordinary shares, the Company first considered the total income (loss) allocable to preferred shares. This is calculated using the total net income (loss) less undistributed income allocable to preferred shares due to their redemption feature.

Calculating diluted EPS incorporates the potential impact of dilution that could occur if outstanding dilutive securities were converted into Ordinary shares or exercised. These securities can include stock options, restricted stock units (RSUs), preferred shares and warrants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;s. Warrants:

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, and meet all of the requirements for equity classification, including whether the warrants are indexed to the Company's own common stock. Warrants that determined to be classified as equity, are recorded as a component of additional paid-in capital. Warrants that determined to be classified as liabilities are recorded at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized in Financial expenses, net in the statements of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;t. Recently
adopted accounting pronouncements:

**ASU 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures**

In December 2023, the FASB issued **ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures**, which requires expanded and more granular disclosures in the income tax footnote, including additional rate reconciliation detail, consistent categories of reconciling items, and disaggregation of income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2023-09 affected only the disclosures related to income taxes. The Company updated its income tax footnote to provide additional rate reconciliation details, categorize reconciling items, and disclose income taxes paid by jurisdiction. The amendments did not have a material effect on the Company's consolidated financial position, results of operations, or cash flows.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;u. Recently issued accounting pronouncements, not yet adopted:

**ASU 2024-03 Income Statement Reporting Comprehensive Income.**

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**, which requires public business entities to disclose disaggregated information about certain expenses (including employee compensation, purchases of inventory, depreciation, and intangible amortization) in a tabular format in the footnotes to the financial statements. The objective of the ASU is to enhance expense transparency for investors. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027; early adoption is permitted. The Company is evaluating the impact of this guidance on its financial statement disclosures.

**ASU 2025-01 — Income Statement (Topic 220-40): Clarifying the Effective Date for Expense Disaggregation Disclosures**

In January 2025, the FASB issued **ASU 2025-01, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date**, which clarifies the effective date provisions of ASU 2024-03. The guidance does not change the underlying disclosure requirements but aligns the timing of required implementation. ASU 2025-01 is effective for annual reporting periods beginning after December 15, 2026, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statement disclosures.

**ASU 2025-03 — Business Combinations (Topic 805) and Consolidation (Topic 810)**

In March 2025, the FASB issued **ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Amendments to Certain Disclosure and Presentation Requirements**, which enhances clarity and consistency in presentation and disclosure requirements related to acquired businesses and consolidated entities, including variable interest entities. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance.

**ASU 2025-04 — Compensation—Stock Compensation (Topic 718) and Revenue (Topic 606): Share-Based Consideration Payable to a Customer**

In May 2025, the FASB issued **ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer**, which clarifies the accounting for share-based payments issued to customers and resolves certain diversity in practice regarding classification and measurement. The guidance is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those years, with early adoption permitted. The Company is evaluating the impact of this ASU on its accounting for share-based arrangements with customers.

**ASU 2025-05 — Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets**

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**, which introduces a practical expedient for estimating expected credit losses for certain short-term receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption reporting periods beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company is assessing the impact this guidance may have on its methodology for estimating credit losses and related disclosures.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;u. Recently issued accounting pronouncements, not yet adopted (cont.)

**ASU 2025-06 — Intangibles—Goodwill and Other (Subtopic 350-40): Internal-Use Software.**

In September 2025, the FASB issued **ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Amendments to Internal-Use Software Guidance**, which modifies the criteria for capitalizing software development costs and removes references to development stages. The guidance also clarifies the accounting for certain web-based software arrangements. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those years, with early adoption permitted. The Company is currently evaluating the effect of this update on the timing of capitalization and related disclosures.

**ASU 2025-10 — Government Grants (Topic 832)**

In November 2025, the FASB issued **ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities**, which provides comprehensive guidance on the recognition, measurement, and presentation of government grants. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the impact of this guidance on its accounting for government assistance arrangements.

**ASU 2025-11 — Interim Reporting (Topic 270): Narrow-Scope Improvements**

In December 2025, the FASB issued **ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements**, which clarifies the organization and application of interim disclosure requirements and establishes a principle requiring disclosure of material events occurring since the most recent annual reporting period. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the potential impact of this guidance on its interim financial statement disclosures.

**NOTE 3:- PREPAID EXPENSES AND OTHER RECEIVABLES**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Government authorities | $87 | $103 |
| Prepaid expenses | 75 | 79 |
| Others | 8 | 31 |
|  | $170 | $213 |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 4:- FAIR VALUE MEASUREMENTS**

In accordance with ASC No. 820, the Company measures warrants liability at fair value classified within Level 3.

The following table presents assets measured at fair value on a recurring basis as of December 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
|  | **Fair value<br> measurement using<br> input Level 3** | **Fair value<br> measurement using<br> input Level 3** |
| Non-current liabilities: |  |  |
| Warrants liability | $&nbsp;&nbsp;&nbsp;&nbsp; - | $3 |
| Total liabilities | $- | $3 |

---

The warrants fair value was established by management leveraging calculations by an independent expert using the binomial model and based on the following assumptions:

During the year ended December 31, 2025, the warrants expired unexercised and, accordingly, the related warrants liability was derecognized.

---

| | | |
|:---|:---|:---|
|  | **December 31,**<br>**2025** | **December 31,**<br>**2024** |
| Dividend Yield on the Shares (%) |  | - |
| Expected Share Price Volatility (%) |  | 91 |
| Risk-free Interest Rate (%) |  | 5% |
| Share Price $|  | 0.019 |

---

**NOTE 5:- PROPERTY, PLANT AND EQUIPMENT, NET**

The composition of property, plant and equipment is as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Cost: |  |  |
| Laboratory equipment | $2169 | $2150 |
| Computers and Cars | 289 | 284 |
| Office, furniture and equipment | 41 | 41 |
| Leasehold improvements | 3723 | 3723 |
| Manufacturing plant \* | 7447 | 7447 |
|  | 13669 | 13645 |
| Less - accumulated depreciation | (5876) | (4456) |
| Property and equipment, net | $7793 | $9189 |

---

Depreciation expenses amounted to $1,420, $1,648 and $514 for the years ended December 31, 2025, 2024 and 2023, respectively.

\* Validation process of the Manufacturing plant was finalized in April 2024. (Refer to note 2.h)

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 6:- LEASES**

The Company has several operating lease agreements that include leases of office space, a lab, a production line, and vehicles used to support the Company's ongoing operations. The vehicle leases are for a period of 3 years. The original lease term of the office space was 10 years and on December 24, 2024, the Company exercised its option to extend the lease for an additional five years which ends at December 31, 2032. At the date of the lease extension, the Company recognized a right-of-use asset and a corresponding lease liability in respect of the extended lease term.

In connection with the exercise of an option to extend the lease term for an existing lease arrangement, the Company reassessed the lease liability and the corresponding right-of-use asset. As required under ASC 842, upon such reassessment, the Company re-evaluated the lease classification and updated the lease discount rate to reflect the rate as of the effective date of the modification. The revised discount rate was used to remeasure the lease liability and right-of-use asset accordingly.

Supplemental balance sheet information related to operating leases is as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended**<br> **December 31,** | **Year ended**<br> **December 31,** |
|  | **2025** | **2024** |
| Office |  |  |
| Weighted average remaining lease term (in years) | 7 | 8 |
| Weighted average discount rate | 16.93% | 16.93% |
| Cars |  |  |
| Weighted average remaining lease term (in years) | - | 0.44 |
| Weighted average discount rate | 18%-26 | 18%-26 |

---

Minimum lease payments for the Company's right of use assets over the remaining lease periods as of December 31, 2025, are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Office** | **Cars** | **Total** |
| 2026 | $386 | $&nbsp;&nbsp;&nbsp;&nbsp; - | $386 |
| 2027 | 386 | - | 386 |
| 2028 | 400 | - | 400 |
| 2029 | 400 | - | 400 |
| 2030-2032 | 1200 | - | 1200 |
| Total undiscounted lease payments | 2772 | - | 2772 |
| Less - adjustment to discounted lease payments | (811) | - | (811) |
| Present value of lease liabilities | $1961 | $- | $1961 |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 6:- LEASES (Cont.)**

*Lease Costs*

The table below presents certain information related to lease costs operating leases:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended<br> December 31,** | **Year ended<br> December 31,** | **Year ended<br> December 31,** |
|  | **2025** | **2024** | **2023** |
| Cash paid for amounts included in the measurement of leases liabilities: |  |  |  |
| Operating leases | $317 | $384 | $343 |
| right-of-use assets obtained in exchange for lease obligations: (non-cash) |  |  |  |
| Operating leases | 186 | 219 | 252 |

---

**NOTE 7:- OTHER PAYABLES**

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2025** | **2024** |
| Employees and payroll accruals | $318 | $254 |
| Deferred Revenues | 90 | 225 |
| Accrued expenses | 441 | 527 |
|  | $849 | $1006 |

---

**NOTE 8:- CONTINGENT LIABILITIES AND COMMITMENTS**

Since 2006, the Company received approximately $6,243 in grants from the Israeli Innovation Authority (IIA). $4,573 of which grants were for research and development of M-001 and $1,670 of which grants were received to support the new CDMO business, out of which grants for $150 were received during 2025.

In exchange for those grants, the Company undertook to pay royalties amounting to 3%-5% on the income deriving from a product (including know-how) which was developed, in whole or in part, directly or indirectly, in the framework of a research and development program that had benefited from IIA support, including any derivatives, and related services thereof. Royalty payments are capped at the amount of the grants received by the Company, plus Annual Interest for a File (as such term is defined in the IIA rules). 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 will be calculated at a rate based on 12-month Secured Overnight Financing Rate, the SOFR, 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 will be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. The maximum royalty amounts payable by the Company as of December 31, 2025 is approximately $5,244 which represents the total gross amount of grants actually received by the Company from the IIA including accrued interest. As of December 31, 2025, the Company had not paid any royalties to the IIA.

At the time the grants were received and as of December 31, 2025, successful development of the M-001 product was not assured and therefore the company does not currently expect to make any royalty payments to the IIA.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 8:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)**

The Company is also subject to various other restrictions pursuant to the grant, including limitations on transferring IP developed with grant funds. In light of the Company's new strategy, it does not expect these restrictions to be material to its ongoing operations.

On November 2023, The Company announced that the IIA had approved a non-dilutive grant covering 66% of the costs of a $975 project aimed to support our new CDMO business. The grant is neither subject to repayment nor tied to royalty payments of any kind. The grant covers approved expenses required for further developing Scinai's CDMO service for the 12 months from grant.

**NOTE 9:- LOAN FROM OTHERS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. On June 19, 2017, the Company entered into a Finance Contract with the European Investment bank (EIB) for a total amount of approximately $22,422 (€ 20,000) and up to 50% of the Company's expected cost of developing and marketing the Company's product candidate, M-001. On April 22, 2019, the Committee of EIB agreed to expand the 2017 financing
agreement with the Company by an additional approximately $4,502 (€ 4,000). In addition, as a repayment features, EIB was entitled to receive the higher between 3% of any M-001 sales revenues for a period of ten years, or realizing a cash-on-cash multiple of 2.8 times.

During 2018 and 2019, the Company received approximately $27,989 (€ 24,000) in two tranches of approximately $7,080 (€ 6,000) and the third tranche of approximately $9,439 (€ 8,000). On October 7, 2019, the Company received the remaining approximately $4,390 (€ 4,000).

In the event the Company elects to prepay the EIB financing, or in the event the EIB shall demand prepayment following certain events, including a change of control, senior management changes or merger events, the Company shall be required to pay EIB the principal amount of the tranches already paid, or the Prepayment Amount, plus the greater of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the amount, as determined by EIB required in order for the EIB to realize an internal rate of return on the relevant amount prepaid of 20%; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Prepayment Amount.

The Finance Contract also stipulates that in the event the EIB demands prepayment of the loan due to any prepayment event to non-EIB lenders, the Company shall be obligated to pay the Prepayment Amount plus an additional reduced amount. In addition, and as consideration for the EIB financing, the EIB shall be entitled to 3% of any annual M-001future revenue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. On October 23, 2020, the Company announced the failure of Phase 3 clinical
trial results of the M-001 universal vaccine product.

As a result of the Phase 3 clinical trial failure, Company's management estimates that there will be no future revenues from the M-001 product. Therefore, most likely, there will be no future royalty payments to EIB from this product.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 9:- LOAN FROM OTHERS (Cont.)**

Under the Finance Contract, the EIB may accelerate all loans extended thereunder if an event of default has occurred, which includes, amongst other things, an event of default arising from the occurrence of a material adverse change, defined as any event or change of condition, which in the opinion of the EIB, has a material adverse effect on: our ability to perform our obligations under the Finance Documents; the Company's business, operations, property, condition (financial or otherwise) or prospects; or the rights or remedies of the EIB under the Finance Contract, amongst other things. If the EIB determines that an event of default has occurred, it could accelerate the amounts outstanding under the Finance Contract, making those amounts immediately due and payable

On January 26, 2021, the EIB notified the Company that it welcomed the Company's efforts to secure future equity financing in an amount not less than $2,000 in order to enable the Company to pursue new business opportunities, strengthen the Company balance sheet and invest in growth. Thus, within that context, the EIB wrote in their letter that they will not consider the failure of the Company's pivotal phase 3 trial for M-001 to meet the primary and secondary efficacy endpoints as a trigger for prepayment of a loan extended under the Finance Contract. However, EIB cautioned the Company that their letter is not a consent, agreement, amendment or waiver in respect of the terms of the Finance Contract, reserving any other right or remedy the EIB may have now or subsequently.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. On August 9, 2022, the Company signed a loan restructuring agreement with the European Investment Bank (EIB) for the new terms of its outstanding approximately $24,554 (€ 24,000) loan to the Company. The new terms include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. An extension of the maturity
 dates from 2023 until December 31, 2027.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Interest on the loan will begin to accrue starting January 1, 2022, at an annual rate of 7%. The interest payments will be deferred until the new maturity date and will be added to the principal balance at the end of each year during the loan period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. An amount of $900 (approximately € 880) were paid by the Company on August 15, 2022, shortly after the execution of the relevant amendment letter with the EIB and was applied to reduce the outstanding loan. In addition, 10% of any capital raises until maturity are to be used to further repay the Loan principal including any outstanding accrued interest.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. If the Company sales exceed approximately $5,332 (€ 5,000), 3% of the revenues will be paid to the EIB as royalties until the EIB receives (from the Loan repayment, inter alia the interest and the royalties) the higher of (i) a total of 2.8 times the original approximately $25,596 (€ 24,000) principal (as provided in the original Loan agreement) and (ii) 20% IRR on the principal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. In case the Company decides to discharge all liabilities under the finance contract, inter alia payments of the variable remuneration, the Company would need to repay to the EIB an indemnity amount in addition to the Loan principal and the accrued interest. The indemnity amount will be calculated such that the EIB receives an additional payment equal to the greater of (i) the prepayment amount (i.e. twice the prepayment amount in the aggregate) and (ii) the amount required to realize 20% IRR on the prepayment amount at the time of prepayment.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 9:- LOAN FROM OTHERS (Cont.)**

The Company accounted for the EIB loan as an extinguishment of the existing debt and the execution of a new debt instrument.

The Company recorded the cash received in each tranche and a corresponding liability to repay the cash. When the estimated cash flows change from the estimates used as of the date on which the EIB loan was issued, the EIB loan's carrying amount is adjusted to an amount equal to the present value of the estimated remaining future payments, discounted by using the original effective interest rate. The adjustment to the carrying amount is recognized in earnings as an adjustment to interest expenses, in the period in which the change in estimate occurred.

As a result of the loan restructure, the Company recorded an amount of $7,168 under finance income and interest expense related to the EIB loan were to $87 For the year ended December 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. During the third quarter of 2023, based on an updated valuation of the Company's discount rate, the company adjusted the carrying amount
of the loan based on updated estimated future cash flows. This resulted in a reversal of previously recognized accretion since August 2022 and financial income of $3,845.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. On November 24, 2023, the Company signed an amendment to the loan agreement with the EIB providing for an extension of the maturity date of the outstanding approximately $24,554 (€ 24,000) loan from December 31, 2027 to December 31, 2031.

The Company evaluated the amendment in accordance with ASC 470-60 Troubled Debt Restructuring, and concluded the EIB loan amendment represented a troubled debt restructuring ("TDR") as the company is experiencing financial difficulty and a concession has been granted by the EIB. As a result, due to the fact that the future undiscounted cash flows of the amended debt were higher than the net carrying value of the existing debt, the net carrying value of the loan wasn't updated and the modification was accounted for prospectively with no gain or loss recorded in the Statements of Operations.

During 2023, as a result of a capital raising, the company paid $833 to the EIB applied toward accrued interest, related to the loan restructure agreement from august 2022 that set a partial repayment of the loan for any capital raising.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. On August 21, 2024, the company closed the Restructuring Agreement with the EIB, which included an amendment to the Finance Contract (the transactions contemplated by the Restructuring Agreement called the "EIB Restructuring Transaction"). In connection with the EIB Restructuring Transaction, an amount equal to approximately EUR 26.6 million (equal to approximately $29 million), including interest accrued to date, owed by the company to the EIB under the Finance Contract was converted into 1,000 preferred shares, no par value per share. The company utilized an external valuation expert to assess the fair value of the preferred shares as of the date of the restructuring agreement.

As a result of the loan conversion the company recorded financial incomes of $14,759. This financial income was calculated based on the variance between the outstanding loan amount as of the conversion date to the fair value of the preferred shares.

Following such conversion, the total outstanding amount to the EIB is EUR 250 (equal to approximately $260). The outstanding amount has a maturity date of December 31, 2031, and no interest accrues or is due and payable on such amount. The Company is no longer required to pay to the EIB (i) royalties based on the Company's commercial sales exceeding EUR 5 million or (ii) a percentage (10%) of the gross proceeds from the Company's capital raises.

The company evaluated the Restructuring Agreement with the EIB in accordance with ASC 470-60 Troubled Debt Restructuring, and concluded the outstanding amount to the EIB represents a troubled debt restructuring ("TDR") as the company is experiencing financial difficulty and a concession has been granted by the EIB.

For the year ended December 31, 2025 and December 31, 2024 the company recorded $33 and $1,421 under finance expenses.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 9:- LOAN FROM OTHERS (Cont.)**

During the year ended December 31, 2024, as a result of a capital raising, the company paid to the EIB $143 against the accrued interest related to the loan restructuring agreement from August 2022 that set a partial repayment of the loan for any capital raising.

As of December 31, 2025 and December 31, 2024, the outstanding principal amount related to the EIB loan in nominal terms is $294 and 260$.

In consideration for the above, EIB received 1,000 of the Company's newly created preferred shares (the "Preferred Shares"), as approved by the Company's shareholders at a meeting of shareholders held on August 12, 2024. The material terms of the Preferred Shares consist of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. The
Preferred Shares are convertible (in whole or in part) into an aggregate of 364,000 ADSs representing 19.5% of the fully diluted share
capital of the Company as of the signature date, August 12, 2024, with each Preferred Share convertible into 364 ADSs. The number of
ADSs that can be acquired upon conversion of the Preferred Shares is also subject to adjustment in the event of any share split, share
dividend and similar events involving the ordinary shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The
Preferred Shares have an aggregate stated fixed redemption amount stated in USD ($34 million, with each Preferred Share carry a redemption
value equal to USD $34 thousand).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. In
the event a Preferred Share is converted into ordinary shares, the right to receive such payment for such Preferred Share will be extinguished.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The
Company will pay the holder of the Preferred Shares the stated redemption amount only if the Company elects, in its sole discretion,
to make such redemption payment, and provided that such redemption is in compliance with applicable law, or in the event of a formal
liquidation of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Following
the payment in full of the redemption amount of a Preferred Share, such share will be considered redeemed and canceled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. In
the event that the distributable proceeds are insufficient for the distribution of the redemption amount in full to each holder of Preferred
Shares for each of the unredeemed Preferred Shares, the distributable proceeds will be distributed among the holders of Preferred Shares
on a pro rata basis in proportion to the number of unredeemed Preferred Shares held by the holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. The
Preferred Shares are entitled to preference in formal liquidation in the stated redemption value of USD $34 million described above (with
each Preferred Share having a preferences in the stated redemption value of described above) ("Preferred Redemption Amount").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. The
Preferred Shares have no dividend right, and dividends on ordinary shares may not be distributed until all preferred shares have been
fully redeemed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The
Preferred Shares are detachable from the remaining EUR 250,000 loan and will survive any loan repayment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. The
Company has a "right of first of refusal" to buy the Preferred Shares in case the EIB intends to sell, transfer, assign or
otherwise dispose of the Preferred Shares (partially or in full).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. Unless
the Company elects to redeem the Preferred Shares, the Company will not take any of the following actions without obtaining the written
consent or affirmative vote of the holders of a majority of the Preferred Shares:

- The Company incurring additional Indebtedness (as defined in the Company's Amended Articles of Association).

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 9:- LOAN FROM OTHERS (Cont.)**

- The Company consummating a merger or an acquisition. <br>- The Company taking any action or step in relation to delisting the ADSs from trading on the Nasdaq.

- The Company's authorizing the creation of any security having rights, preferences or privileges equal to or greater than those of the Preferred Shares, including the issuance of additional Preferred Shares.

Based on the above and according to ASC 470-60 requirements, the Company applies the following accounting treatment as of the agreement signing date:

● The Preferred Shares were measured at their fair value as of the closing date of the 2024 Amendment. The Company recognized an increase in its shareholders' equity for the fair value of the Preferred Shares issued. The carrying amount of the debt will be reduced by the Preferred Shares' fair value.

● The debt's carrying amount was reduced to the total amount of the undiscounted future cash flows of the restructured debt (that is, 250,000 EUR). This additional reduction was recognized as a debt restructuring gain in the Company's financial statements.

**NOTE 10:- SHAREHOLDERS' EQUITY**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Rights attached to shares:

An ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends, and a right to participate in the distribution of surplus assets upon liquidation of the Company.

Preferred shares are redeemable, nonassessable, and convertible into ADSs, which must be duly authorized and free of pre-emptive rights. Issuance and conversion require no further approvals and do not breach corporate or legal obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. On November 10, 2022, the Company announced that it plans to affect a ratio change of the ADSs to its non-traded ordinary shares from the previous ratio of one (1) ADS representing forty (40) ordinary shares to a new ratio of one (1) ADS representing four hundred (400) ordinary shares. The ratio change had the same effect as a reverse split of the existing ADSs of one (1) new ADS for every ten (10) old ADSs. The effective date for the ratio change was November 25, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. On December 13, 2022, the shareholders approved an amendment to the Company's Articles of Association increasing the registered share capital of the Company by an additional 18,200,000,000 Ordinary Shares (the equivalent of 4,550,000 ADSs) such that the total registered share capital of the Company would consist of 20,000,000,000 Ordinary Shares, no par value (the equivalent of 5,000,000 ADSs).

d On December 20, 2022, the Company closed an underwritten public offering with gross proceeds to the Company of $8,000 before deducting underwriting discounts and other expenses payable by the Company. The offering consisted of 160,000 units and pre-funded units. Each unit consisted of one ADS and two warrants, each to purchase one ADS, and each pre-funded unit consists of one pre-funded warrant to purchase one ADS and two warrants each to purchase one ADS. One of the warrants (Non-Exchangeable Warrant) will expire three years from the date of issuance, and the other warrant (Exchangeable Warrant) expired one year from the date of issuance and provided for exercised for half an ADS on or prior to six (6) months following the original issuance for no additional consideration. Each ADS (or pre-funded warrant) was sold together with two warrants at a combined purchase price of $5.00 per unit (or $4.99 per pre-funded unit after reducing $0.01 attributable to the exercise price of the pre-funded warrants). The Company issued a total of 400,000 Common Units and 120,000 pre-funded units, including 160,000 Exchangeable Warrants and 160,000 Non Exchangeable Warrants. The Company received a net sum of $7,231 after deduction of underwriter discount and issuance expenses of $769. The warrants were classified as liabilities, initially and subsequently measured at fair value through earnings pursuant to ASC 480 as the warrants are not considered indexed to the Company's own shares.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 10:- SHAREHOLDERS' EQUITY (Cont.)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. On September 19, 2023, the Company closed
an offering in which the Company issued (i) in a registered direct offering, 40,000 ADSs and pre-funded warrants to purchase up to 74,655
ADSs, at an exercise price of $0.01 per ADS, at a purchase price of $11.6 per ADS and $11.59 per pre-funded warrant, and (ii) in a concurrent
private placement, unregistered warrants to purchase up to 114,655 ADSs. The warrants have an exercise price of $11.6 per ADS and are
exercisable for a period of five and one-half years from issuance. The company received gross proceeds of approximately $1.33 million
and a net sum of approximately $1.0 million after deduction of placement agent fees and issuance expenses. The warrants were accounted
as equity.

f. On October 11, 2023, the Company issued 28,939 ADSs to a service
provider. The fair value of the ADSs that were granted was $270.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. On January 4, 2024, the Company closed an offering in which the Company issued new unregistered warrants to purchase up to 521,310 ADSs in consideration for the immediate exercise of certain outstanding warrants to purchase up to an aggregate of 260,655 ADSs, issued by us in September 2023 and December 2022, at a reduced exercise price of $6.50 per ADS. The new warrants have an exercise price of $6.50 per ADS and have a term of exercise equal to three years or five and one-half years, as applicable, based on the term of the exercised warrants, from the date of issuance. The Company received gross proceeds of approximately $1.69 million and a net sum of approximately $1.42 million, after deduction of underwriter discount and issuance expenses of $263.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. On May 6, 2024, the Company issued a press release announcing receipt of a Nasdaq delisting notification regarding the Company's non-compliance with the minimum $1.00 bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2) (the "Minimum Price Rule") and appeal as well as the board approval of a ratio change of the ADSs to non-traded ordinary shares (equivalent to a reverse split) designed to regain compliance. On May 24, 2024, the Company issued a press release announcing the receipt of a Nasdaq staff determination letter regarding the Company's non-compliance with the minimum stockholders' equity requirement of at least $2,500 for continued under Nasdaq Listing Rule 5550(b)(1) (the "Minimum Shareholders' Equity Rule") and a hearing before the Nasdaq Hearing Panel to present a plan for regaining compliance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. On May 21, 2024, the ratio between the Company's ordinary shares and its ADSs was increased from 400 ordinary shares per one ADS to 4,000 ordinary shares per one ADS, a change which was equivalent to a reverse split of 10 for 1. All ADS amounts have been retrospectively applied to these financial statements, where applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j. On June 7, 2024, the Company announced
 receipt of notification from Nasdaq that it had regained compliance with the Minimum Price Rule.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k. On June 18, 2024, the Company presented to the Nasdaq Hearing Panel the Company's plan to regain compliance with the Minimum Shareholders' Equity Rule. On August 29, 2024, following the completion of the conversion of approximately EUR 26.6 million (approximately $29 million), including accrued interest, of the Company's outstanding loan to the European Investment Bank (EIB) into 1,000 preferred shares with no par value, the Company received formal notification from Nasdaq staff confirming that it had regained compliance with the stockholders' equity requirement under Listing Rule 5550(b)(1). Following this transaction, the remaining outstanding amount owed to the EIB is EUR 250 (approximately $294), which bears no interest, is not prepayable, and matures on December 31, 2031.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 10:- SHAREHOLDERS' EQUITY (Cont.)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l. On August 20, 2024, the Company announced that it had entered into a $2 million Investment Commitment Agreement with RK Stone Miami LLC, an affiliate of Mr. Daniel Stone, the largest shareholder of the Company which contemplated the potential issuance and sale of ADSs and possibly pre-funded warrants to the investor. from time to time through December 31, 2024 (the "Commitment Period"), for an aggregate purchase price of up to $2 million. Each such sale of ADSs may be initiated (at the Company's discretion) by the Company providing an advance notice to the Investor of the sale of ADSs in a minimum amount of $200,000 and a maximum amount of $500,000, provided the maximum amounts in any month may not exceed $500,000 and the Company may not provide advance notices for an aggregate amount greater than $1.5 million prior to December 1, 2024. The price of the ADSs to be purchased under any advance will be calculated based on the lower of (i) the volume weighted average price (the "VWAP") of the daily VWAP of the ADSs for the ten trading days prior to the Company providing the advance notice or (ii) the VWAP of the daily VWAP of the ADSs for the three trading days following the delivery of the advance notice (provided the Company may impose a minimum market price for such three day period, and in the event the market price for such period is less than the minimum market price the Company has the right to rescind the advance notice and not issue the ADSs), in either case subject to a discount of 5%. Pursuant to the agreement, the Company was to pay the Investor a commitment fee, payable in cash or in ADSs at the option of the Company. In the event that during the Commitment Period the Company provides to the investor an advance notice, the amount of the commitment fee will be equal to $100,000, which was to be payable by the Company simultaneously with the closing of the first advance. Pursuant to the agreement, in the event the Company elects to pay such amount in the form of ADSs, the number of the ADSs was to be based on the market price determined for such advance. In the event that during the Commitment Period the Company does not provide to the Investor an advance notice, the amount of the commitment fee would have been equal to $40,000, payable by the Company promptly following the termination of the Commitment Period. In the event the Company elects to pay such amount in the form of ADSs, the number of the ADSs was to be based on the market price determined as of December 31, 2024. Pursuant to the agreement, the company issued pre-funded warrants to RK Stone to acquire an aggregate of 617,744 ADSs for an aggregate purchase price of $2.0 million. In addition, the Company issued 28,698 pre-funded warrants to RK Stone as a commitment fee in accordance with the terms of the agreement.

m. On March 3, 2025, the Company entered into the Standby Equity Purchase Agreement ("SEPA")
with YA II PN, Ltd. ("YA"), pursuant to which YA has committed to purchase up to $10.0 million of ADSs, or the Commitment
Amount, at the company's direction from time to time, subject to the restrictions and satisfaction of the conditions in the SEPA,
during the period commencing on the date of execution of the SEPA until the earlier of (i) the 36-month anniversary of the date of execution
of the SEPA, and (ii) YA's purchase of the total Commitment Amount under the SEPA, such period the Commitment Period. Pursuant
to the terms of the SEPA, the Company issued 28,784 ADSs (the "Commitment Shares") to YA as consideration for its irrevocable
commitment to purchase the Advance Shares under the SEPA. In connection with the SEPA, the Company recognized issuance-related costs
of approximately $150, which were recorded as finance costs.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 10:- SHAREHOLDERS' EQUITY (Cont.)**

**The Company filed a registration statement on Form F-1 to register the resale of up to 3,022,796 ADSs issuable to YA under the SEPA from time to time during the Commitment Period (including the Commitment Shares), subject to the restrictions and satisfaction of the conditions in the Purchase Agreement, if and when the Company determine to sell additional ADSs to YA under the SEPA.YA has no right to require the company to sell any ADSs to YA, but YA is obligated to make purchases of the ADSs as directed by the company, subject to the restrictions and satisfaction of conditions set forth in the Purchase Agreement upon receipt of a notice sent by the Company to YA setting forth the number of ADSs that the Company desire to issue and sell to YA, or an Advance Notice. The purchase price of the ADSs that the Company may direct YA to purchase from time to time under the SEPA will be equal to 97% of the lowest daily volume weighted average price (VWAP) during the three consecutive trading day period commencing on the date that the Company delivers any Advance Notice to YA. The Company have the right to set a floor price in the Advance Notice that sets a lower limit of the ADS price at which the Company are willing to sell ADSs to YA.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n. In June 2025, the Company raised $1,492 in gross proceeds through drawdowns under the Purchase Agreement. The funding was executed at a volume-weighted average price of approximately $2.9 per ADS, reflecting a 3% discount to the market price at the time. As part of this transaction, the Company issued 511,690 ADSs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o. In July and August 2025, the Company raised $4,203 in proceeds through drawdowns under the Standby Equity Purchase Agreement with Yorkville Advisors. The capital raising was executed at a volume-weighted average price of approximately $2.57 per ADS, reflecting a 3% discount to market price at the time of sale. As part of this transaction, the Company issued 1,638,062 ADSs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;p. On September 10, 2025, the Company entered into a Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. ("YA"), Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to YA from time to time during the 36 months following the execution of the SEPA (each such occurrence, an "Advance") up to $15.0 million (the "Commitment Amount") of the Company's American Depositary Shares (the "ADSs"), each representing 4,000 ordinary shares, no par value, of the Company ("Ordinary Shares"), subject to the restrictions and satisfaction of the conditions in the SEPA.

As consideration for Yorkville's commitment, the Company agreed to a commitment fee of $108,000, of which 50% was paid via the issuance of 35,461 ADSs upon signing, and the remaining 50% is payable in cash upon the earlier of the first Advance or 90 days following SEC effectiveness of the related Registration Statement.

Under the terms of the SEPA, each drawdown (an "Advance") is made at a purchase price equal to 97% of the lowest daily volume-weighted average price ("VWAP") during the three consecutive trading days following the delivery of each Advance Notice. The Company may include a floor price in each Advance Notice to set a minimum acceptable price per ADS.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 11:- SHARE-BASED COMPENSATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Option plans:

Options granted under the Company's 2005 Israeli Share Option Plan ("Plan") were exercisable in accordance with the terms of the Plan, within 10 years from the date of grant, against payment of an exercise price. The options generally vest over a period of three or four years.

In March 2018, the Company's Board of Directors approved the adoption of the Company's 2018 Israeli Share Option Plan ("2018 Plan") for the grant of options and restricted shares ("RSU") to employees, directors and service providers. The options are exercisable within 10 years from the date of grant, against payment of the exercise price, in accordance with the terms of the 2018 Plan. The options generally vest over a period of three or four years.

During 2024 the company granted 94,964 RSU to employees and directors.

During 2025 the company granted 321,841 RSU to employees and directors.

*Option grants:*

Expected volatility was calculated based upon the Company's historical share price and historical volatilities of similar entities in the related sector index. The expected term of the options granted is derived from output of the option valuation

model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

During the year ended December 31, 2025, the board of directors approved the grant of an aggregate of 321,841 RSUs, each vesting in three years, 220,300 of which RSU's were granted to officers and directors and 101,541 RSU's of which were granted to employees of the Company. The value of the said RSU's was $281 thousand.

During the year ended December 31, 2023, the board of directors approved the grant of an aggregate of 44,933 RSUs, each vesting in three years, 36,423 of which RSU's were granted to officers and directors and 8,509 RSU's of which were granted to employees of the Company. The value of the said RSU's was $635 thousand.

On August 24, 2023, shareholders approved the grant of option awards to our directors and chairman of the board. The company granted 18,680 ADS's options purchase 18,680 ADSs of the Company in the aggregate, all at an exercise price of $18.1. The options vest in equal annual installments over a period of three years, commencing one year following the date of shareholder approval. The options are subject to accelerated vesting and will become immediately exercisable in the event of a change of control.

The value of the said options was $193 thousand.

On the same day, the Company also cancelled options previously granted to our directors and chairman and granted replacement options to these directors. Shareholders approved that all the options that were held at by directors and chairman at the time of the meeting be cancelled and in exchange therefor the Company would grant a replacement option to purchase such number of ADSs (each, a "Replacement Option") that is equal to the aggregate number of ADSs subject to the options held at the time by the company directors and chairman. The number of ADSs underlying the Replacement Option that were issued in exchange for the options that were held by our directors and chairman was 5,627 ADS's. The exercise price of per ADS for the Replacement Options is $18.1. The options vest in equal annual installments over a period of three years, commencing one year following the date of shareholder approval. The options are subject to accelerated vesting and will become immediately exercisable in the event of a change of control. The fair value of the replacement warrants was $59.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 11:- SHARE-BASED COMPENSATION (Cont.)**

The fair value of the Replacement Options is more than the fair value of the old options, the incremental amount will be recognized in equal annual installments over a period of three years, commencing one year following the date of shareholder approval.

The following table lists the inputs to the binomial option-pricing model used for the fair value measurement of equity-settled share options for the above Options Plans for the years 2024, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** |
|  | **2025** | **2024** | **2023** |
| Dividend yield | 0% | -% | 0% |
| Expected volatility of the share prices | 104% | -% | 107% |
| Risk-free interest rate | 4.2% | -% | 4.2% |
| Expected term (in years) | 10 | -% | 10 |

---

\* During the year 2024 there were no new grants of options.

Based on the above inputs, the fair value of the ADS options was determined to be $1.03 and $1.10 for the years ended December 31, 2023 and 2025, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The following table summarizes the number of options granted to employees under the Option Plans for the year ended December 31, 2025 and related information:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of options** | **Weighted**<br> **average**<br> **exercise**<br> **price** | **Weighted average remaining contractual term** <br> **(in years)** | **Aggregate**<br> **intrinsic<br> value** |
| Balance as of December 31, 2024 | 97228400 | 0.005 | 8.65 | 12 |
| Granted | 413200000 | - | 10 | 12 |
| Forfeited | - | - | - | - |
| Balance as of December 31, 2025 | 510428400 | 0.001 | 9.54 | 12 |
| Exercisable as of December 31, 2025 | 75600975 | 0.001 | 9.54 | 12 |

---

As of December 31, 2025, there are $315 of total unrecognized costs related to share-based compensation that is expected to be recognized over a period of up to four years.

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 11:- SHARE-BASED COMPENSATION (Cont.)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The following table summarizes information about the Company's outstanding and exercisable options granted to employees as of December 31, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Exercise price** | **Options outstanding as of**<br> **December 31, 2025** | **Weighted average remaining**<br> **contractual term<br> (years)** | **Options exercisable as of December 31,**<br> **2025** | **Weighted average remaining**<br> **contractual term<br> (years)** |
| $0.001 | 510428400 | 9.54 | 75600975 | 9.54 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. A summary of ADSs restricted shares units activity for the year ended December 31, 2025 is as follows:

---

| | | |
|:---|:---|:---|
|  | **Number of ADS** | **Weighted average grant date fair value** |
| Balance as of December 31, 2024 | 106183 | 7.22 |
| Granted | 218541 | 0.87 |
| Vested | (26974) | 4.31 |
| Forfeited | (26679) | 4.10 |
| Balance as of December 31, 2025 | 271071 | 4.13 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. The total share-based compensation expense related to all of the Company's equity-based awards, recognized for the years ended December 31, 2025, 2024 and 2023 is comprised as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** |
|  | **2025** | **2024** | **2023** |
| Research and development expenses | $(48) | $322 | $107 |
| Cost of revenues | 182 |  |  |
| Marketing, general and administrative expenses | 170 | 360 | 1032 |
| Total share-based compensation | $304 | $682 | $1139 |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 12:- REVENUES**

The Company recognized revenue from contracts with customers for the years ended December 31, 2025, 2024 and 2023 as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** |
|  | **2025** | **2024** | **2023** |
| Revenues from CDMO recognized Over time | $406 | $496 | $- |
| Revenues from CDMO recognized Point in time | 905 | 62 | - |
| Revenues recognized from Licensing | - | 100 | - |
| Total | $1311 | $658 | $- |

---

**NOTE 13:- TAXES ON INCOME**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Corporate tax rates

Corporate tax rate in Israel was 23% in 2025 and 2024 and 2023.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Net operating losses carryforward:

The Company has net operating losses for tax purposes as of December 31, 2025 totaling approximately $122 millions, 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;c. Final tax assessments:

The Company's tax assessments through the 2019 tax year are considered final.

&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.

Significant components of the Company's deferred tax assets and liabilities are as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended**<br> **December 31,** | **Year ended**<br> **December 31,** |
|  | **2025** | **2024** |
| Deferred tax assets: |  |  |
| Net operating loss carry forward | $28139 | $23377 |
| Temporary differences mainly relating to Research and Development |  |  |
| Lease liabilities | 378 | 322 |
| Deferred tax asset before valuation allowance | 28517 | 23699 |
| Deferred tax liabilities: |  |  |
| Right-of-use assets | (409) | (284) |
| Deferred tax liabilities before valuation allowance | (409) | (284) |
| Valuation allowance | (28108) | (23415) |
| Deferred tax asset, net | $- | $- |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 13:- TAXES ON INCOME (Cont.)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Reconciliation of the theoretical
 tax expense to the actual tax expense:

The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Reconciliation of Income
 Taxes:

The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes.

---

| | | |
|:---|:---|:---|
|  | **Year ended**<br> **December 31, 2025** | **Year ended**<br> **December 31, 2025** |
|  | **Tax** | **Rate** |
| IL statutory tax rate | $1911 | 23% |
| **Foreign tax effects:** |  |  |
| Statutory tax rate difference between U.S. and Israel | (10) | (2)% |
| Statutory tax rate difference between Poland and Israel | 2 | (4)% |
| **Non-taxable or non-deductible items:** |  |  |
| Share-based compensation | (28) | - |
| Changes in valuation allowance | $(1875) | $- |
| Total income taxes | - | - |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 14:- BASIC AND DILUTED NET LOSS (INCOME) PER SHARE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Details of the number of ordinary shares and loss used in the computation of net loss per share:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** |
|  | **2025** | **2024** | **2023** |
| Basic and diluted (Earnings) Losses per ordinary share |  |  |  |
| Net (income) loss | 8307 | (4796) | 6500 |
| Less - Undistributed income allocable to preferred shares due to their redemption feature | 8307 | (4796) | - |
| Net (income) loss applicable to ordinary shareholders | - | - | 6500 |
| Weighted average number of shares used in the computation of basic and diluted (income) loss per ordinary share | 9339460965 | 3225472266 | 1562627495 |
| Basic and diluted (Earnings) Losses per ordinary share | 0.0009 | - | 0.004 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. The following items have been excluded from the diluted weighted average number of shares outstanding because they are anti – diluted:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** |
|  | **2025** | **2025** | **2024** | **2024** | **2023** | **2023** |
| Share Options |  | 510428400 |  | 97228400 |  | 98491200 |
| Restricted share units |  | 1369284729 |  | 424732329 |  | 214729600 |
| Warrants |  | 3069812444 |  | 2231316096 |  | 1100500800 |
| Preferred shares |  | 1456000000 |  | 1456000000 |  | - |

---

**SCINAI IMMUNOTHERAPEUTICS LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**U.S. dollars in thousands (except share and per share data and unless otherwise indicated)**

**NOTE 15:- FINANCIAL INCOME (EXPENSES), NET**

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended <br> December 31,** | **Year ended <br> December 31,** | **Year ended <br> December 31,** |
|  | **2025** | **2024** | **2023** |
| Income: |  |  |  |
| Exchange differences, net | $- | $- | - |
| Remeasurement of warrants liabilities | 3 | 91 | 4024 |
| Bank deposits | 20 | 100 | 79 |
| Finance income in respect of loans from others | - | - | 3845 |
|  | 23 | 191 | 7948 |
| Expenses: |  |  |  |
| Exchange differences, net | 419 | 84 | 933 |
| Finance expense, net | 359 | 1422 | 3801 |
| Bank commissions and other financial expenses | 10 | 10 | 8 |
|  | 788 | 1516 | 4742 |
| Total financial (income) expenses, net | $765 | $1325 | 3206 |

---

**NOTE 16:- SEGMENTS**

The Company operates as one operating segment. The Company's chief operating decision maker ("CODM") is its chief executive officer, manages the Company's business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance based on consolidated net income which is consistent with the basis the consolidated statements of operations are presented.

Major Customers:

The Company derives a significant portion of its revenue from a limited number of customers.

During the reported periods, there were four customers, each representing more than 10% of the total sales.

The revenues from these customers are as follows:

**NOTE 17:- SUBSEQUENT EVENTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. On February 17, 2026, the Company, through a wholly owned subsidiary, entered into a Share Purchase Agreement (the "SPA") with Recipharm AB, Recipharm Israel Ltd. and certain minority shareholders (collectively, the "Sellers"), pursuant to which the Company acquired 100% of the issued and outstanding share capital of Recipharm Israel Ltd. (the "Subsidiary"). The aggregate purchase price for the shares was €1. In connection with the transaction, Recipharm AB made an irrevocable capital contribution to the Subsidiary immediately prior to closing in an amount sufficient to ensure that, at closing, the Subsidiary held cash of €2.0 million plus an amount equal to all pre-closing expenses and liabilities, which were funded in full by the Sellers. Concurrently with the closing, Recipharm AB assigned to the Company all of its rights under an existing intercompany loan agreement with the Subsidiary, including all outstanding principal and accrued interest, for nominal consideration of €1. As part of the acquisition of the Subsidiary, we also acquired the
Subsidiary's manufacturing capabilities at a facility in Yavne, Israel.
The transaction closed simultaneously with execution of the SPA and was entered into in connection with a commercial collaboration agreement between the parties. The SPA contains customary representations and warranties relating to, among other things, corporate authority, capitalization, financial statements prepared in accordance with IFRS, intellectual property, material contracts, tax matters, employees and regulatory compliance, as well as customary covenants and indemnification provisions, including obligations relating to pre-closing taxes and liabilities, termination of certain intercompany arrangements, transition support, and post-closing use of the "Recipharm" name.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. On February 27, 2026, the Company entered into a second amendment to the binding option agreement to acquire PinCell S.r.l. The amendment extends the deadline for satisfaction of the option conditions to August 31, 2026 and the option exercise date to September 30, 2026. In addition, the Company agreed to make monthly payments of approximately €13 thousand through August 2026 (approximately €80 thousand in aggregate) to support the target's operating activities. These payments are non-refundable and are treated as additional consideration under the agreement. Following the rejection of the initial grant application and subsequent appeal in 2025, the Company is preparing to submit a revised application under the SMART Path program in Poland seeking €12 million of non-dilutive funding to support the continued development of PC111. The Company expects to submit the application by the end of the first quarter of 2026, and a decision on the application is expected during 2026.

## Exhibit 1.1

**Exhibit 1.1**

COMPANIES LAW, 5759 – 1999

LIMITED SHARES COMPANY

Amended and Restated Articles of Association

of

SCINAI IMMUNOTHERAPEUTICSLTD.

&nbsp;&nbsp;&nbsp;&nbsp;1. In these articles, except where the written content requires a different interpretation:

**"Law"** As defined in the Interpretation Law, 5741 – 1981;

**"The Company"** The abovementioned Company;

**"The Law"** or the **"Companies Law"** The Companies Law, 5759 – 1999, as it shall be from time to time;

"**Administrative Enforcement Proceeding"** An administrative enforcement proceeding in accordance with the provisions of any law, including the Improvement of Enforcement Proceedings Law and the Securities Law, including an administrative petition or appeal in connection with the aforementioned proceeding;

"**Securities Law**" The Securities Law, 5728 – 1968, as it is updated from time to time;

"**The Office**" or the "**Registered Office**" The Company's office, the address of which is registered with the Registrar, as it shall be from time to time;

"**The Ordinance**" or the "**Companies Ordinance**" The Companies Ordinance (new version), 5743 – 1983, as it is updated from time to time, and the regulations subject thereto;

"**Ordinary Majority**" An ordinary majority of the total votes of shareholders attending a general meeting or class meetings, as the case may be, who are entitled to vote and have voted therein, without taking into account the abstaining votes;

"**Year" or "Month**" According to the Gregorian calendar;

"**Corporation**" A company, partnership, cooperative society, association, and any other incorporated or unincorporated body of persons;

"**These Articles of Association**" or the "**Articles of Association**" The Articles of Association drafted in this document, as they may change from time to time;

"**Indebtedness**":

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) obligations for borrowed money;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) indebtedness under any acceptance credit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) indebtedness under any bond, debenture, note or similar instrument;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) instrument under any bill of exchange;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) indebtedness in respect of any interest rate or currency swap or forward currency sale or purchase or other form of interest or currency hedging transaction (including without limit caps, collars and floors);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) indebtedness under any finance lease **;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) indebtedness (actual or contingent) under any guarantee, bond security, indemnity or other agreement **;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) indebtedness (actual or contingent) under any instrument entered into for the purpose of raising finance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) indebtedness in respect of a liability to reimburse a purchaser of any receivables sold or discounted in the event that any amount of those receivables is not paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) indebtedness arising under a securitisation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) other transaction that has the commercial effect of borrowing.

"**M&A Event**": Any amalgamation, demerger, merger or corporate reconstruction in relation to the Company.

"**Permitted Hedging**":

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any derivative transaction by the Borrower to hedge actual or projected exposure arising in the ordinary course of trading and not for speculative purposes; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any derivative instrument of the Borrower which is accounted for on a hedge accounting basis but is not entered into for speculative purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1. Any term in these Articles of Association not defined in the abovementioned article shall bear the meaning prescribed thereto in the Companies Law, unless the aforesaid constitutes a contradiction to the written subject or its content; words stated in the singular shall be construed as well in the plural, and vice versa, words stated in the male gender shall be construed in the female gender as well.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2. The headings in these Articles of Association are for convenience purposes only and shall not be used to construe these Articles of Association.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3. Anywhere in the Articles of Association where it is determined that its provisions shall be subject to the provisions of the Ordinance and/or subject to the provisions of the Companies Law and/or subject to the provisions of any law, this means the provisions of the Ordinance and/or the provisions of the Companies Law and/or the provisions of any law, which may not be subjected to conditions, unless the context requires otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4. The provisions which may be subject to conditions in the Companies Law shall apply to the Company wherever it is not stated to the contrary in these Articles of Association and as long as there is no contradiction between them and the provisions of these Articles of Association.

**<u>COMPANY NAME</u>**

&nbsp;&nbsp;&nbsp;&nbsp;2. The Company's name is as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. In Hebrew - סאינאי אימונותרפאוטיקה בע"מ

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2. In
 English – Scinai Immunotherapeutics Ltd.

**<u>LIMITATION OF LIABILITY</u>**

&nbsp;&nbsp;&nbsp;&nbsp;3. The liability of the shareholders is limited to repayment to the Company of the par value of the shares they own, if said sum has not yet been paid to the Company. In the event that the Company allots shares for consideration lower than their par value as stated in section 304 to the Law (the "Reduced Consideration"), the liability of each shareholder shall be limited to the repayment of the Reduced Consideration sum for each share allotted thereto as aforementioned.

**<u>COMPANY'S OBJECTIVES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;4. The objectives of the Company are to engage in any lawful activity in the field of biotechnology.

**<u>BUSINESS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;5. The Company may, at any time, engage in any branch or type of business in which it is authorized, explicitly or implicitly, to engage subject to Article 4 above. In addition the Company may cease from engaging in such businesses, whether it has begun said branch or type of business, or otherwise.

**<u>DONATIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;6. The Company may donate reasonable amounts to worthy causes, even if said donation is not within the framework of the Company's business considerations. The Board of Directors is authorized to determine, subject to its discretion, the sums of the donations, the purposes for which they are executed, the identity of the receiver of the donation, and any other condition in connection therewith.

**<u>REGISTERED OFFICE</u>**

&nbsp;&nbsp;&nbsp;&nbsp;7. The Company's registered office will be at the address determined by the Board of Directors, as it changes from time to time.

**<u>THE ARTICLES OF ASSOCIATION</u>**

&nbsp;&nbsp;&nbsp;&nbsp;8. The Company may amend these Articles of Association upon a resolution passed by the General Meeting with a majority of at least 75% of the voting rights at the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;9. A resolution passed by the General Meeting with the required majority to amend the Articles of Association, as stated in Article 8 above, which amends any of the provisions of these Articles of Association, will be deemed a resolution to amend these Articles of Association, even if this was not explicitly stated in the resolution.

&nbsp;&nbsp;&nbsp;&nbsp;10. Subject to the provisions of the Companies Law, amendments to these Articles of Association will be valid as of the date of passing the resolution in this matter by the Company or on a later date determined in the resolution.

**<u>REGISTERED SHARE CAPITAL</u>**

&nbsp;&nbsp;&nbsp;&nbsp;11. The Company's registered share capital consists of (i) 100,000,000,000 Ordinary Shares, no par value (the "Ordinary Shares"), and (ii) 1,000 Preferred Shares, no par value (the "Preferred Shares" and together with the Ordinary Shares, the "Shares").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1. Each Ordinary Share grants its owner the following rights:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Receiving an invitation and participation in the Company's General Meetings and voting thereat;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) One vote at the General Meeting votes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) Subject to Article 143 below, participation in the distributed profit of the Company pro rata to the sum paid on account of the share's par value; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) Subject to Article 170 below, in the event of distribution of surpluses of the Company's assets (after payment of its debt) to the shareholders as part of Liquidation (as defined below) – participation in the distribution of the surplus pro rata to the sum paid on account of the share's par value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2. Each Preferred Share grants its owner the following rights:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) Subject to Article 143 below, participation in the distributed profit of the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) Subject to Article 170 below, in the event of distribution of surpluses of the Company's assets (after payment of its debt) to the shareholders as part of Liquidation – participation in the distribution of the surplus.

**<u>THE SHARES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Ordinary Shares</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1. Subject to Articles 143 and 1 below and such rights of the Preferred Shares, each Ordinary Share in the Company's equity bears equal rights, for all intents and purposes, compared to any other Ordinary Share, including the right to a dividend, bonus shares, and participation in the distribution of surplus Company assets during Liquidation (as defined in Article 170 below), on a pro rata basis with all other Ordinary Shares, without taking into account any premium paid therefor, and all subject to the provisions of these Articles of Association.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2. Each of the Ordinary Shares entitles its owner to the right to participate in the Company's General Meeting and to one vote.

&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Preferred Shares</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1. Subject to Article 1 below and prior and in preference to any such rights of the Ordinary Shares, each Preferred Share in the Company's equity bears equal rights, for all intents and purposes, compared to any other Preferred Share, including the right to bonus shares and participation in the distribution of surplus Company assets during Liquidation on a pro rata basis with all other Preferred Shares, without taking into account any premium paid therefor, and all subject to the provisions of these Articles of Association.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2. Except as provided in Article 172 and except with respect to amendments to these Articles that would affect the rights of the Preferred Shareholders, the Preferred Shares shall not entitle their owners to the right to vote (either as a class or on an as converted basis) on any matters brought to holders of the Ordinary Shares for approval.

&nbsp;&nbsp;&nbsp;&nbsp;14. A Company shareholder is anyone registered as a shareholder in the shareholders ledger, and anyone who owns a share registered with a stock exchange member and the same share is included among the shares registered in the Company's shareholders ledger in the name of the registration company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1. A shareholder who is a trustee will be registered in the shareholders ledger while stating his trusteeship, and he shall be deemed for the purpose of the Companies Law a shareholder. Without derogating from the aforementioned, the Company will recognize the trustee, as aforesaid, as the shareholder, for all intents and purposes, and will not recognize any other person, including the beneficiary, as having any right whatsoever in the share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2. Without derogating from the abovementioned, and subject to the provisions of these Articles of Association, apart from Company shareholders, as stated in Article 14.1 above, no person shall be recognized by the Company as having any right whatsoever in a share and the Company will not be bound by and will not acknowledge any benefit subject to equity laws or fiduciary relations or chose in action, future or partial in any share or benefit whatsoever in a share fraction or any other right pertaining to a share except only the right of a shareholder as stated in Article 14.1 above, in an entire share, and all, except if an authorized court has instructed to the contrary.

**<u>SHARE CERTIFICATES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;15. The certificates attesting to the proprietary right in the shares shall bear the Company seal and the signatures of one director jointly with the Company CEO or jointly with the Company secretary or the signatures of any two people appointed for this purpose by the Board of Directors. The Board of Directors may decide that a signature or signatures as abovementioned shall be done in any mechanical way, as determined by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;16. Except in the event that the terms of issue of shares determine otherwise:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.1. Each registered shareholder is entitled to receive from the Company, as per his request, within a period of two months after the allotment or registration of transfer, as the case may be, one certificate attesting to his ownership in the shares registered in his name, or, with the Company's consent, a number of aforesaid certificates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.2. The registration company is entitled to receive from the Company, as per its request, within a period of two months after the allotment or registration of transfer, as the case may be, one certificate attesting to the number of shares and class of shares registered in its name in the shareholder ledger.

&nbsp;&nbsp;&nbsp;&nbsp;17. Subject to the provisions of the Companies Law, each certificate shall specify the amount of shares for which it was issued, their serial numbers and par value.

&nbsp;&nbsp;&nbsp;&nbsp;18. A certificate referring to a share registered to two persons or more, shall be delivered to anyone whose name appears first in the shareholder ledger, with regard to the same share, unless all registered owners of the same share, instruct the Company in writing to deliver it to another registered owner.

&nbsp;&nbsp;&nbsp;&nbsp;19. In the event that a share certificate is destroyed, damaged, lost, or impaired, the Board of Directors may order the cancellation thereof and issue a new certificate in lieu thereof, provided that the share certificate was delivered to the Company and destroyed thereby, or it was proven to the satisfaction of the Board of Directors that the certificate was lost or destroyed and the Company received guarantees to the Board of Directors' satisfaction for any damage which may occur thereto. For each share certificate issued subject to this article a reasonable sum shall be paid therefor as determined by the Board of Directors from time to time.

**<u>PAYMENTS FOR SHARES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;20. All of the shares in the Company's issued capital will be fully paid-up shares.

**<u>FORFEITURE OF SHARES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;21. Without derogating from Article 20 above, the Board of Directors may forfeit a share allotted by the Company and sell it, if the consideration payable by the shareholder, all or some, was not paid to the Company, and the provisions of the Companies Law in this matter shall apply.

**<u>TRANSFER AND DELIVERY OF SHARES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;22. Any transfer of shares registered in the name of the registration company shall be performed through the registration company. Any transfer of shares registered in the shareholder ledger in the name of a registered shareholder, including a transfer by the registration company or thereto, shall be done in writing, provided that the deed of transfer is signed by hand only, by the transferor or the transferee, themselves or by proxy, and by witnesses to the signing, and delivered to the registered office or any other place determined for this purpose by the Board of Directors. Subject to the provisions of the Companies Law, transfer of shares will not be registered in the shareholder ledger, except after a transfer deed as abovementioned is delivered to the Company; the transferor will continue to be considered the owner of the transferred shares until the transferee is registered in the shareholder ledger as the owner of the transferred shares.

&nbsp;&nbsp;&nbsp;&nbsp;23. The share transfer deed will be in writing, in the format acceptable in Israel or in any other format approved by the Board of Directors. If the transferor or transferee are a corporation, confirmation will be provided by an attorney or accountant or another person the identity of whom is acceptable to the Board of Directors, regarding the authority of those signing on behalf of the corporation to execute or receive the transfer, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;24. The Company may close the shareholder ledger for a duration determined by the Board of Directors provided that it does not exceed, in total, thirty days each year. While the ledger is closed, no transfer of shares will be registered in the ledger. Without derogating from the aforementioned, the Board of Directors may determine an effective date for the question of entitlement to vote at the General Meeting, or receive a dividend payment or allotment of any rights whatsoever or for any other legal purpose.

&nbsp;&nbsp;&nbsp;&nbsp;25. Subject to the provisions of these Articles of Association or the terms of issue of shares of any class, the shares will be transferable without requiring the approval of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;26. Each transfer deed will be submitted to the office or any other place determined by the Board of Directors, for the purpose of registration, together with the share certificate about to be transferred, if such was issued, and any other proof required by the Board of Directors regarding the proprietary right of the transferor or his right to transfer the shares. The deeds of transfer registered will remain in the Company's possession however any deed of transfer which the Board of Directors refuses to register will be returned to the submitter, as per his request.

&nbsp;&nbsp;&nbsp;&nbsp;27. If the Board of Directors refuses to approve a transfer of shares due to failure to fulfill any of the terms specified in Article 26 above, it shall notify the transferor of this no later than one month from the date of receiving the deed of transfer.

&nbsp;&nbsp;&nbsp;&nbsp;28. The Company will be entitled to charge payment for the registration of the transfer, at a sum determined by the Board of Directors, from time to time, and which will be reasonable under the circumstances.

29. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.1. Subject to the provisions of the Companies Law and the provisions of these Articles of Association, if it is proven to the Company to the Board of Directors' satisfaction and by means determined thereby, that the legal requirements were upheld to endorse a right in the shares registered in the ledger in the name of a registered shareholder, the Company will recognize the endorsee, and him alone, as the owner of the right in the aforementioned shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29.2. Notwithstanding the abovementioned, in the event of death of one or more of the joint owners of shares registered in their name in the ledger, the Company will recognize the remaining registered owners, and them alone, as having a proprietary right in those shares.

30. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.1. Subject to the provisions of these Articles of Association, the Company will change the registration of ownership in shares in the shareholders ledger if the Company receives a court order to amend the ledger or if it was proven to the Company, to the Board of Directors' satisfaction and by methods determined thereby, that the legal requirements were upheld to endorse the right in the shares, and the Company will not recognize any other right of a person in the shares, prior to proving his right as abovementioned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2. Without derogating from the abovementioned, the Board of Directors may refuse to perform the registration or may delay it, as it would be entitled to do, had the registered owner himself transferred the share prior to the endorsement of the right.

&nbsp;&nbsp;&nbsp;&nbsp;31. Subject to the provisions of the Companies Law and the provisions of these Articles of Association, a person who becomes entitled to a share as stated in Article 29 above, will be entitled to perform a transfer of the shares as the registered owner of the shares would have been entitled to himself prior to the endorsement of the right.

&nbsp;&nbsp;&nbsp;&nbsp;32. The Company may destroy the share transfer deeds after seven years have passed from the date of registration in the ledger; in addition, the Company may destroy revoked share certificates, after seven years have passed from their date of revocation, and a prima facie presumption shall apply that all of the transfer deeds and certificates destroyed, as aforementioned, were fully valid and that the transfers, revocations, and registrations, as the case may be, were duly executed.

**<u>CHANGES IN CAPITAL</u>**

&nbsp;&nbsp;&nbsp;&nbsp;33. Subject to the provisions of any law, the Company may, with a resolution passed at the General Meeting by Ordinary Majority, increase the Company's registered share capital, with types of shares, as it shall determine.

&nbsp;&nbsp;&nbsp;&nbsp;34. Subject to the provisions of the Companies Law, the Company may, with a resolution passed at the General Meeting by ordinary majority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34.1. Consolidate its shares, all or some, and divide them into shares of par values greater than the par value of its existing shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34.2. Divide its shares, all or some, by secondary division, into shares of par values smaller than the par value of its existing shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34.3. Reduce the Company's capital and any capital redemption reserve fund.

In order to execute any resolution as abovementioned, the Board of Directors may settle, subject to its discretion, any difficulty arising therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;35. Without derogating from the generality of the Board of Directors' authority, as abovementioned, if as a result of the consolidation or division, as abovementioned, the shareholders will remain with share fractions, the Board of Directors may subject to its discretion act as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.1. Determine that the share fractions that do not entitle their owners to a whole share will be sold by the Company and the consideration of the sale will be paid to those entitled, subject to the conditions and in the manner determined.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.2. Allot to each shareholder which the consolidation and/or division leave in their hands a share fraction, shares of the type of shares existing in the Company capital prior to the consolidation and/or division, of such a number so that their consolidation with the fraction creates one whole share, and an allotment as aforementioned will be deemed in effect near before the consolidation or division, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.3. Determine the manner in which the sums owed for the shares allotted as stated in Article 35.2 will be redeemed, including the manner in which the sums can be redeemed on account of bonus shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.4. Determine that the owners of share fractions will not be entitled to receive a whole share for a share fraction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35.5. Determine that shareholders will not be entitled to receive a whole share for a fraction of a whole share at a certain par value or less and will be entitled to receive a whole share for a fraction of a whole share the par value of which is higher than the aforementioned par value.

&nbsp;&nbsp;&nbsp;&nbsp;36. The Company may, with a resolution passed by the General Meeting by ordinary majority, revoke registered share capital that has not yet been allotted, provided that there is no undertaking by the Company, including a contingent undertaking, to allot the shares.

**<u>CHANGE OF RIGHTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;37. At any time in which the share capital is divided into different classes, the Company will be entitled by ordinary resolution passed at the General Meeting by ordinary majority, except if the terms of issue of the same class of shares stipulate otherwise, to revoke, convert, expand, add, reduce, amend, or change in any other way the rights of a class of the Company shares, provided that consent was granted thereto in writing by all shareholders of the same class or that the resolution was passed at a General Meeting of the shareholders of the same class by ordinary majority, or in the event that the terms of issue of a certain class of Company shares stipulate otherwise, as was stipulated in the terms of issue of the same class.

&nbsp;&nbsp;&nbsp;&nbsp;38. The provisions set in the Articles of Association regarding General Meetings shall apply, mutatis mutandis, to any class meeting. However if no such legal quorum is created, the class meeting will be deferred to another date and at the deferred meeting any number of participants will constitute a legal quorum, regardless of the number of shares they own.

&nbsp;&nbsp;&nbsp;&nbsp;39. The rights of the shareholders or the owners of a class of shares, issued whether as ordinary rights or preferred rights or other extraordinary rights, shall not be considered as if they were converted, reduced, derogated, or changed in any other manner by the creation or issue of additional shares of any type whatsoever, whether at an equal level or a different or preferred level thereto, and they will not be considered as if they were converted, reduced, derogated, or changed in any other way, by changing the rights attached to shares of any other class whatsoever, and all, unless otherwise explicitly stipulated in the terms of issue of the same shares.

**<u>ISSUE OF SHARES AND OTHER SECURITIES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;40. The Board of Directors may issue shares and other securities, convertible or exercisable into shares, up to the limit of the Company's registered share capital; in this matter convertible securities that are convertible or exercisable into shares shall be considered as if they were converted or exercised on the date of the issue. Without derogating from the generality of the aforementioned, the Board of Directors will be entitled to issue the shares and other securities, as abovementioned, grant choice rights to purchase them including options or to grant them in another way, and all to the people determined thereby and on the dates, at the prices and subject to the terms determined thereby, and to determine any other instruction related thereto, including provisions regarding the methods of distributing the shares and securities issued by the Company, among their buyers, including in the event of oversubscription, and all subject to the discretion of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;41. Without derogating from the generality of the aforementioned, and subject to the provisions of the Companies Law and the Articles of Association, the Board of Directors may determine that the consideration for the shares will be paid in cash or with assets in kind, and thus including with securities or any other manner, subject to its discretion, or that the shares will be allotted as bonus shares or that the shares will be allotted for consideration equal to their par value or higher therefrom, whether in unit or in series, and all subject to the conditions and on the dates determined by the Board of Directors, subject to its discretion.

&nbsp;&nbsp;&nbsp;&nbsp;42. In a resolution to increase the Company's registered capital the General Meeting may determine that the new shares included in the sum with which the registered share capital is increased as aforementioned (hereinafter referred to as the "New Shares"), or any part thereof, will be first offered, for their par value or a premium, to all of the shareholders holding shares at that time, at a proportionate rate to the par value of their shares in the Company or determine other provisions regarding the issue and allotment of the New Shares. However, if the General Meeting did not determine as aforementioned in a resolution to increase the Company's registered share capital, the Board of Directors may offer them, as stated in Article 40 above.

&nbsp;&nbsp;&nbsp;&nbsp;43. The Board of Directors may decide to pay commission or underwriting fees to any person, upon signing or agreement to sign or obtaining signatures or guaranteeing signatures for shares, or debentures or other Company securities. In addition the Board of Directors is entitled, in any event of issuing securities of the Company, to decide to pay brokerage fees, and all, in cash, in Company shares, or other securities issued by the Company, or in any other way, or partly in one way and partly in another way, all subject to the provisions of any law.

**<u>REDEEMABLE SECURITIES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;44. Subject to the provisions of any law, the Company may issue redeemable securities subject to the terms and in the manner determined by the Board of Directors, subject to its discretion.

**<u>REGISTRIES</u>**

45. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45.1. The Company will keep a shareholder ledger and register therein the names of the shareholders and other details required subject to the Companies Law, near after the issue of any shares of the Company. Subject to the provisions of the Law, upon his registration in the ledger the registered shareholder will be deemed the owner of the shares registered in his name, and thus even if share certificates for said shares were not issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45.2. The Company will keep a ledger of material shareholders, as is required subject to the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;46. The Company may keep an additional shareholders ledger outside of Israel subject to the conditions determined for this matter in the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;47. The Company will keep a ledger of the holders of debentures and securities convertible into Company shares, and all of the provisions of the Articles of Association in connection with shares shall apply to said convertible securities, with regard to registration in the ledger, issue of certificates, replacement of certificates, transfer and endorsement, mutatis mutandis as the case may be, and all subject to the terms of the allotment of the securities.

**<u>GENERAL MEETING</u>**

&nbsp;&nbsp;&nbsp;&nbsp;48. The Company's decisions in the following matters shall be approved at the General Meeting:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.1. Articles of Association amendments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.2. Exercising the Board of Directors' authority by the General Meeting, if the Board of Directors is unable to exercise its authorities and the exercise of an authority of its authorities is vital for the orderly management of the Company, as stated in section 52(a) to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.3. Appointing the Company's auditor and termination of his employment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.4. Appointing the Company directors and their dismissal;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.5. Approving actions and transactions that require the approval of the General Meeting subject to the provisions in sections 255 and 268 to 275 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.6. Increasing the registered share capital and decreasing it in accordance with the provisions of sections 286 and 287 to the Companies Law as well as changes in capital as specified in Article 34 above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.7. Subject to the provisions of section 320(a1) to the Companies Law, merger as stated in section 320(a) to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.8. Any resolution which must be passed according to the Articles of Association by a resolution of the General Meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48.9. Authorizing the chairperson of the Board of Directors or his relative to fulfill the duty of CEO or exercise his authorities and authorizing the CEO or his relative to fulfill the duty of chairperson of the Board of Directors or exercise his authorities, as stated in section 121(c) to the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;49. The Company will hold an annual General Meeting each year and no later than fifteen months after the last annual General Meeting, on the date and at the place determined by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;50. The agenda of the annual General Meeting will include the following subjects:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50.1. Discussion regarding the Company financial statements and the Board of Directors report regarding the state of the Company's affairs, submitted to the General Meeting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50.2. Appointing directors and determining their salary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50.3. Appointing the auditor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50.4. Board of Directors report regarding the salary of the auditor for auditing activity and for additional services, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50.5. In addition to the abovementioned, any other subject put on the agenda as stated in Article 53 below may be included on the agenda of the annual General Meeting.

A General Meeting as abovementioned will be referred to as an "**annual meeting**" and any other meeting will be referred to as an "**extraordinary meeting**".

&nbsp;&nbsp;&nbsp;&nbsp;51. The Company Board of Directors will convene an extraordinary meeting subject to its discretion, and upon the demand of any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51.1. Two directors or a quarter of the serving directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51.2. A shareholder, one or more, who holds at least five percent of the issued capital and one percent of the Company's voting rights, or a shareholder, one or more, than has at least five percent of the voting rights in the Company.

If the Board of Directors is required to summon an extraordinary meeting, as abovementioned, it will summon it within twenty one days from the date the demand was submitted thereto, for the date determined in the notice regarding the extraordinary meeting, as stated in Article 55.1 below, provided that the date on which it is convened is no later than thirty five days from the date of publishing the notice, all subject to the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;52. If the Board of Directors failed to summon an extraordinary meeting demanded subject to Article 51 above, the demander may, and when concerning shareholders – even some of those who have more than half of their voting rights, convene the meeting himself, provided that it is not held after three months have passed from the date on which the aforementioned demand was submitted, and it will be convened, as much as possible, in the same manner in which meetings are convened by the Board of Directors.

53. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;53.1. The agenda of a General Meeting will be determined by the Board of Directors and will include all subjects for which the convening of an extraordinary meeting was demanded subject to article 51 above and a subject requested as stated in Article 53.2 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;53.2. A shareholder, one or more, with at least one percent of the voting rights at the General Meeting, may request that the Board of Directors include a subject on the agenda of a future General Meeting, provided that the subject is appropriate for discussion at a General Meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;53.3. A request as specified in Article 53.2 above will be submitted to the Company in writing at least seven days prior to the delivery of notice regarding the convening of a General Meeting, and the draft of the resolution proposed by the shareholder will be attached thereto.

54. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;54.1. A notice regarding a General Meeting will be published in at least two daily newspapers, with wide circulation, published in the Hebrew language; subject to the provisions of the Companies Law, the notice will be published at least 21 days prior to the convening of the General Meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;54.2. Apart from the notice regarding a General Meeting as stated in Article 54.1 above, the Company will not deliver notice regarding a General Meeting, both to the registered and non-registered shareholders, subject to the provisions of the Law.

55. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;55.1. The notice regarding the General Meeting will specify the location, date and time of the convening of the meeting and it will include the agenda as well as a summary of the proposed resolutions and any other specification required by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;55.2. In its decision to summon a meeting, the Board of Directors may determine the manner of specification of the subjects on the agenda of the meeting, which will be delivered to the shareholders entitled to participate in the meeting, and all subject to the discretion of the Board of Directors and subject to the provisions of the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;55.3. Without derogating from the authority of the Board of Directors as stated in this Article 55 above and without derogating from the generality of the provisions of the Articles of Association regarding transfer of authorities by the Board of Directors, the Board of Directors will be entitled to transfer its authorities as stated in this Article 55 above to the Board of Directors committee and/or Company officer, whether for the purpose of a certain General Meeting or for a period.

&nbsp;&nbsp;&nbsp;&nbsp;56. A bona fide fault in the convening of the General Meeting or the convening thereof, including a fault arising from the failure to comply with an instruction or the conditions of the law or the Articles of Association, including with regard to the manner of convening or managing the General Meeting, will not invalidate any resolution passed at the General Meeting and will not derogate from the discussions held therein, subject to the provisions of any law.

**<u>DELIBERATIONS AT THE GENERAL MEETING</u>**

&nbsp;&nbsp;&nbsp;&nbsp;57. A deliberation at the General Meeting shall not be started unless a legal quorum is present upon opening the meeting. A legal quorum will be created with the attendance, themselves or by proxy, of shareholder/s holding, alone or accumulatively, at least 10% of the Company's voting rights (or, for so long as the Company does not qualify as a foreign private issuer under the rules of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and for only so long as required by the Nasdaq Stock Market, 33-1/3% of the Company's outstanding ordinary shares) within half an hour from the time set for opening the meeting, unless otherwise stipulated in the Articles of Association.

&nbsp;&nbsp;&nbsp;&nbsp;58. If a legal quorum is not in attendance at the General Meeting after half an hour from the time set for the opening of the meeting, the meeting will be deferred for one week, to the same date, same time and same location, without the requirement of notifying the shareholders of this, or another date is such was stated in the a notice regarding the meeting, or to a different date, hour and location, as shall be determined by the Board of Directors in a notice to the shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;59. A deferred meeting will be held with any number of participants (unless the Company does not qualify as a foreign private issuer under the rules of the Exchange Act).

&nbsp;&nbsp;&nbsp;&nbsp;60. The chairperson of the Board of Directors, or, in the absence thereof, any director appointed for this purpose by the Board of Directors, will head each General Meeting of the Company. In the absence of a chairperson, as stated or if at any meeting whatsoever none of them are present fifteen minutes after the time set for the opening of the meeting or if they refuse to serve as chairperson of the meeting, the present directors, by a majority of votes among them, may choose a chairperson among them or among the Company officers attending the meeting, and if they fail to do so – the present shareholders themselves or by proxy will choose one of the present directors or officers to head the meeting. If no directors or officers are present or if the directors or officers all refuse to head the meeting, they will choose one of the shareholders or the proxy of an aforementioned shareholder to head the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;61. The Company will take minutes of the proceeding at the General Meeting which will include the following details:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;61.1. The names of the shareholders participating at the General Meeting and the number of shares held thereby; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;61.2. The matters deliberated at the General Meeting and the passed resolutions.

&nbsp;&nbsp;&nbsp;&nbsp;62. Minutes signed by the chairperson of the General Meeting constitutes prima facie evidence to its contents.

**<u>VOTING AND PASSING RESOLUTIONS AT THE GENERAL MEETINGS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;63. A shareholder who wishes to vote at the General Meeting will prove to the Company his ownership of a share, as required subject to the Companies Law. Without derogating from the aforementioned, the Board of Directors may determine provisions and procedures for proving the ownership of Company shares.

&nbsp;&nbsp;&nbsp;&nbsp;64. A shareholder may vote at a General Meeting or class meeting, himself or by proxy, all subject to the provisions of the Articles of Association and subject to the provisions of the Companies Law. A proxy at a vote does not have to be a Company shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;65. Subject to the provisions of any law, in the event of joint ownership in a share, each of them may vote at any meeting, whether himself or by proxy, with regard to such share, as if he were the sole person entitled thereto. If more than one of the joint owners of a share attend the meeting, themselves or by proxy, the one whose name is listed first in the shareholder ledger with regard to the share, or in the approval of the Tel Aviv Stock Exchange member regarding his ownership of the share ("Ownership Confirmation"), or in another document determined by the Board of Directors for this purpose, shall vote, as the case may be. A number of legal guardians or a number of estate executers of a deceased registered shareholder shall be considered for the purpose of this section as joint owners of these shares.

&nbsp;&nbsp;&nbsp;&nbsp;66. Any person entitled to a share subject to Article 29 above may vote subject thereto at any General Meeting in the same manner as if he were the registered owner of those shares provided that he proves to the Board of Directors' satisfaction his right to the share at least forty-eight hours prior to the date of the General Meeting or the deferred meeting, as the case may be, where he intends to vote, unless the Company has previously recognized his right to vote subject to those shares at such meeting.

&nbsp;&nbsp;&nbsp;&nbsp;67. The document appointing a proxy for a vote ("Letter of Proxy") will be drafted in writing and signed by the appointer, and if the appointer is a corporation, the Letter of Proxy will be drafted in writing and signed in the manner obligating the corporation; the Board of Directors may demand that the Company receive prior to the convening of the meeting, confirmation in writing, to the Board of Directors' satisfaction, regarding the signatories' authority to obligate the corporation. In addition, the Board of Directors is entitled to determine instructions and procedures in connection therewith.

The Letter of Proxy or an appropriate copy thereof, to the Board of Directors' satisfaction, will be deposited at the registered office or another place or places, in Israel or abroad – as shall be determined by the Board of Directors from time to time, in general or with regard to a special case – at least forty-eight hours prior to the beginning of the meeting or the deferred meeting, as the case may be, when the proxy intends to vote based on said Letter of Proxy. Notwithstanding the abovementioned, the chairperson of the meeting may, subject to his discretion, receive a Letter of Proxy as aforementioned, even after the aforesaid date, if he deemed this appropriate, subject to his discretion. If no Letter of Proxy was received as stated in this section above, it will be invalid at that meeting.

&nbsp;&nbsp;&nbsp;&nbsp;68. A proxy at a vote may participate in the deliberations at the General Meeting and be chosen as chairperson of the meeting as the appointing shareholder would have been entitled provided that nothing to the contrary was stated in the Letter of Proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68.1. The Letter of Proxy appointing a proxy to participate in a vote will be in the form acceptable in Israel or any other form approved by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68.2. The Letter of Proxy will note the class and number of shares for which it was granted, If no number of shares for which it was granted are stated in the Letter of Proxy or if it states a number of shares higher than the number of shares registered to the name of the shareholder or stated in the Ownership Confirmation, as the case may be, the Letter of Proxy will be deemed as given for the shares of the shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68.3. If the Letter of Proxy is given for a number of shares lower than the number of shares registered to the name of the shareholder or stated in the Ownership Confirmation, as the case may be, the shareholder will be deemed as if he avoided attending the vote for the balance of his shares and the Letter of Proxy will be valid for the number of shares stated therein.

&nbsp;&nbsp;&nbsp;&nbsp;69. Without derogating from the provisions of the Articles of Association regarding appointment of a proxy to a vote, a shareholder holding more than one share will be entitled to appoint more than one proxy, subject to these instructions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69.1. Each Letter of Proxy will note the class on number of shares for which it was granted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;69.2. If the total number of shares of any class stated in the Letter of Proxy given by one shareholder exceeds the number of shares of the same class registered in his name or stated in the Ownership Confirmation, as the case may be, all Letters of Proxy granted by the same shareholder shall be null and void.

&nbsp;&nbsp;&nbsp;&nbsp;70. A shareholder or proxy at a vote may vote subject to some of the shares he owns or for which he serves as a proxy, and may vote subject to some of the shares in one manner and subject to some of them in another manner.

&nbsp;&nbsp;&nbsp;&nbsp;71. A vote subject to a Letter of Proxy will be valid even if there was a flaw in the Letter of Proxy and even if prior to the vote the appointer died or was declared incompetent or if the Letter of Proxy was revoked or the share for which the Letter of Proxy was granted was transferred, unless prior to the meeting notice was received at the office, in writing, regarding the flaw, death, incompetency, revocation, or transfer, as the case may be. Notwithstanding the abovementioned, the meeting chairperson may, subject to his discretion, accept notice as aforementioned even during the meeting, if he decides that this is appropriate, subject to his discretion.

&nbsp;&nbsp;&nbsp;&nbsp;72. A Letter of Proxy will be valid as well with regard to any deferred meeting of a meeting to which the Letter of Proxy refers, provided that nothing to the contrary was stated in the Letter of Proxy.

&nbsp;&nbsp;&nbsp;&nbsp;73. Each of the Ordinary Shares entitles its owner to the right to participate in the Company's General Meetings and to one vote.

&nbsp;&nbsp;&nbsp;&nbsp;74. A resolution put up for a vote at a General Meeting will be decided by a vote of the number of votes; the vote will be performed in the manner determined by the chairperson of the meeting. In the event of a dispute regarding whether to accept any vote or disqualify it the chairperson of the meeting will resolve the matter and his bona fide decision will be final and decisive.

&nbsp;&nbsp;&nbsp;&nbsp;75. The announcement of the chairperson that the resolution at the General Meeting was passed or rejected, whether unanimously or by any majority and a note stated in this matter in the minutes of the meeting will constitute prima facie evidence to that which was stated therein, and there will be no further necessity to prove the number of votes (or their relative portion) given for or against the resolution.

&nbsp;&nbsp;&nbsp;&nbsp;76. Subject to the provisions of the Companies Law or the provisions of the Articles of Association regarding another majority, the resolutions of the General Meeting will be passed by ordinary majority. In the event that the number of votes for and against are equal, the chairperson of the meeting will not have an additional or decisive vote.

&nbsp;&nbsp;&nbsp;&nbsp;77. The chairperson of the General Meeting may, with the consent of a meeting that has a legal quorum, defer it or defer the deliberation or defer passing a resolution in a certain subject which is on that day's agenda, to another date and place determined, and he must do so subject to the meeting's demand. At a deferred meeting as aforementioned, no subject shall be discussed except that which was on the agenda and for which no resolution was made at the meeting where the deferral was decided upon. If the General Meeting is deferred to a date that exceeds twenty-one days, notices and invitations to the deferred meeting will be given as stated in Articles 54 and 55 above. If the General Meeting is deferred without changing its agenda, to a date that does not exceed 21 days, notices and invitations regarding the new date will be given as soon as possible, and no later than 72 hours before the General Meeting; the notices and invitations as aforementioned shall be given subject to sections 54 and 55, mutatis mutandis.

&nbsp;&nbsp;&nbsp;&nbsp;78. .Subject to the provisions of the Companies Law and its regulations, votes at a General Meeting in the subjects mentioned below can be performed as well by means of a voting ballot: (a) appointment and dismissal of directors; (b) approval of actions or transactions that require the General Meeting's approval subject to the provisions of sections 255 and 268 to 275 to the Companies Law; (c) approval of a merger subject to section 320 to the Companies Law; (date) subjects determined by the Minister in the regulations instated or that will be instated subject to section 89 to the Companies Law.

**<u>THE BOARD OF DIRECTORS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;79. The number of directors, including any external directors required by Israeli law, shall be no less than three and no more than eleven.

&nbsp;&nbsp;&nbsp;&nbsp;80. The directors will be appointed at the annual meeting. The directors, excluding the external directors, shall be classified into three groups (A, B and C) as nearly equal in number as practicable. Subject to the foregoing, the duration of their service, except for the external directors, shall be as follows:

● One-third of the directors will belong to group A, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.

● One-third of the directors will be appointed to group B, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.

● One-third of the directors will be appointed to group C, and the duration of their service shall be from the time of their appointment until the third annual meeting held after the date of their appointment.

At each annual meeting, the three-year duration of service of one group of directors shall expire, and the directors of such group will stand for election. Each of the directors or the successors elected to replace the directors of a group whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting held after the date of his or her election and until his or her respective successor is elected. If no directors are appointed at the annual meeting, the directors appointed at the previous annual meeting will continue their service. Directors whose service period has ended may be appointed again.

Directors may be elected for a term of less than three years in order to enable that the three groups of directors have as equal a number of directors as possible as provided in this Article 80.

&nbsp;&nbsp;&nbsp;&nbsp;81. Apart from anyone who served as director until the date of the annual meeting, no director shall be appointed at the annual meeting, unless the Board of Directors recommended the appointment thereof, or if a Company shareholder wishing to suggest him had submitted to the office, no later than seven days from the date of publishing the notice regarding the meeting, a document in writing signed by the shareholder, announcing the intention of same shareholder to suggest that this candidate be appointed as director, while the written consent of the candidate to serve as director is attached to the document.

&nbsp;&nbsp;&nbsp;&nbsp;82. The Board of Directors may, from time to time, appoint an additional director or directors to the Company, whether for the purpose of filling the position of a director vacated for any reason whatsoever or as an additional director or directors, provided that the total amount of directors does not exceed the maximum number stated in Article 79 above. 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 stated in Article 79 above, the Board shall determine at the time of appointment the class pursuant to Article ‎80 above, to which the additional director shall be assigned

&nbsp;&nbsp;&nbsp;&nbsp;83. The shareholders may, at an extraordinary meeting, appoint an additional director or directors to the Company, whether for the purpose of filling a position that was vacated for any reason whatsoever or as an additional director or directors. Directors appointed as abovementioned to fill a vacated position, except for external directors, will finish their service in accordance with the group to which the director whose position was vacated belonged, subject to the provisions of Article 80 above.

&nbsp;&nbsp;&nbsp;&nbsp;84. Notwithstanding the abovementioned, the Company Board of Directors and General Meeting may at any time, upon a resolution with a majority of at least 75% of the voting rights at the Board of Directors or General Meeting, as the case may be, remove from office any director, except for an external director, prior to the end of his service period, provided that the director is granted the reasonable opportunity to present his case before the General Meeting. In addition, any General Meeting, with an ordinary majority resolution, may appoint in lieu of the director removed from office as abovementioned another person as director. A director appointed as abovementioned will serve in his position only for the period of service which the director whom he had replaced would have served.

&nbsp;&nbsp;&nbsp;&nbsp;85. If the position of a director is vacated, the Board of Directors shall be entitled to continue to act with regard to any matter as long as the number of directors is no less than the minimum number of directors stated in Article 79 above. If the number of directors is less than this number, the Board of Directors will not be entitled to act except for the purpose of convening a General Meeting in order to appoint additional director, however not for any other purpose.

&nbsp;&nbsp;&nbsp;&nbsp;86. A director may resign by delivering notice to the Board of Directors, to the chairperson of the Board of Directors or the office, as is required subject to the Companies Law, and his resignation shall take effect on the date on which the notice was delivered, unless the notice states a later date. The director will disclose the reasons for his resignation.

&nbsp;&nbsp;&nbsp;&nbsp;87. Subject to the provisions of the Companies Law, the Company may pay the directors compensation for fulfilling their duty as directors.

88. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88.1. A director is entitled to appoint a substitute and thus subject to approving him as alternate director by the Board of Directors (hereinafter referred to as the "Alternate Director"). Notwithstanding the abovementioned, anyone unsuitable to be appointed as director shall not be appointed and shall not serve as Alternate Director, and as well anyone serving as Company director or as Alternate Director for a Company director or as the representative of a corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88.2. The Alternate Director is equal to the director for whom he serves as a substitute, and he will be entitled to attend the meetings of the Board of Directors and/or Board of Directors committees, participate and vote therein, same as the eligibility of the appointing director.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88.3. A director who had appointed an Alternate Director may, subject to the provisions of the law, revoke the appointment at any time. In addition, the position of Alternate Director will be vacated whenever the position of the director who had appointed the Alternate Director is vacated in any manner whatsoever.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88.4. Any appointment or revocation of the appointment of Alternate Director, as abovementioned, will be done by written notice delivered to the Alternate Director and to the Company, and shall take effect after the delivery of the letter of appointment, as abovementioned or on the date stated in the letter of appointment, according to the later date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;88.5. Subject to the provisions of the Companies Law, the Company may pay to the Alternate Director compensation for his participation in Board of Directors meetings.

**<u>EXTERNAL DIRECTORS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;89. To the extent required by the Companies Law and the regulations thereunder, the Company will have at least two external directors, and the provisions of the Companies Law in this matter shall apply.

**<u>BOARD OF DIRECTORS AUTHORITY AND FUNCTIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;90. The Board of Directors will have all authorities and powers vested therein subject to the Company Articles of Association, the Companies Law and any law.

&nbsp;&nbsp;&nbsp;&nbsp;91. Without derogating from the provisions of these Articles of Association, the Board of Directors will outline the Company's policy and oversee the performance of the CEO's duties and actions, including –

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.1. Determine the Company's action plans, the principles for financing them and their order of priority;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.2. Examine the Company's financial situation and determine its approved line of credit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.3. Determine the organizational structure and the remuneration policy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.4. Entitled to determine the issue of a series of debentures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.5. Responsible for preparing and approving the financial statements, as stated in section 171 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.6. Report to the annual meeting regarding the state of the Company's affairs and its business results, as stated in section 173 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.7. Appoint and dismiss the CEO;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.8. Decide regarding actions and transactions that require its approval subject to the Company Articles of Association or the provisions of sections 255 and 268 to 275 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.9. May allot shares and securities convertible into shares up to the limit of the Company's registered share capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.10. May decide to distribute a dividend or bonus shares, as the case may be;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.11. May decide upon an acquisition as this term is defined in section 1 to the Companies Law, from all of the Company's shareholders or part of them or any of them, subject to its discretion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.12. Offer an opinion regarding a special tender offer, as stated in section 329 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;91.13. Determine the minimum required number of directors on the Board of Directors, who must have accounting and financial expertise, as this is defined in section 240 to the Companies Law; the Board of Directors will determine the aforementioned minimum number based, inter alia, on the Company's nature, size, scope of the Company's activity and the complexity thereof, and subject to the number of directors stipulated in the Articles of Association subject to section 219 to the Companies Law.

The Board of Directors' authorities subject to this section may not be delegated to the CEO, expect as specified in the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;92. A power of the Company, not granted by law or the Company's Articles of Association to another organ, may be executed by the Board of Directors.

93. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93.1. The Board of Directors may resolve that the authorities vested in the CEO will be transferred to its authority, all in connection with a specific matter, or a specific timeframe, which shall not exceed the timeframe required under the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93.2. Without derogating from the aforementioned, the Board of Directors may instruct the CEO on how to act with regard to a specific matter. If the CEO fails to comply with the instruction, the Board of Directors may exercise the required authority in order to execute the instruction in lieu thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93.3. If the CEO is barred from exercising his authorities, the Board of Directors may exercise them in lieu thereof.

&nbsp;&nbsp;&nbsp;&nbsp;94. Subject to the provisions of the Companies Law, the Board of Directors may delegate from its authorities to the CEO, a Company officer or another person. Delegating an authority of the Board of Directors may be for a certain matter or for a certain timeframe, all subject to the Board of Directors' discretion.

**<u>RECEIVING CREDIT AND GRANTING GUARANTEES AND COLLATERAL</u>**

&nbsp;&nbsp;&nbsp;&nbsp;95. Without derogating from any authority vested in the Board of Directors subject to these Articles of Association, the Board of Directors may, from time to time, subject to its discretion, resolve upon:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95.1. Receiving credit by the Company at any sum and securing its discharge, in the manner it deems fit;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95.2. Granting guarantees, collateral, and warranties of any kind;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95.3. Issuing a series of debentures, including capital notes or bonds, and including debentures, capital notes or bonds convertible or exercisable into shares, and to determine their terms, and pledge its property, all or some, whether in the present or in the future, whether by a floating or fixed charge. Debentures, capital notes, bonds, or other guarantees, as abovementioned, may be issued at a discount, with a premium or in any other manner, whether with deferred rights and/or special rights and/or privileges and/or other rights, all as determined by the Board of Directors subject to its discretion.

&nbsp;&nbsp;&nbsp;&nbsp;96. The abovementioned in Article 95 does not negate the authority of the CEO or anyone authorized thereby for this purpose, to decide upon accepting credit by the Company, within the framework of the credit line and the guarantees determined by the Board of Directors.

**<u>BOARD OF DIRECTORS COMMITTEES</u>**

97. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the Companies Law, the Board of Directors may, as it deems fit, create Board of Directors committees, consisting of two members or more, and delegate from its authorities thereto. Notwithstanding the abovementioned, the Board of Directors may not delegate from its authorities to a Board of Directors committee with regard to the following subjects:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Determining general policy for the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Distribution, unless pertaining to the purchase of Company shares in accordance with a framework outlined in advance by the Board of Directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Determining the position of the Board of Directors in a matter that requires the approval of the General Meeting or granting an opinion as stated in section 329 to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Appointing directors, if the Board of Directors is entitled to appoint them;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Issue or allotment of shares or securities convertible into shares or exercisable into shares, or a series of debentures, except for that which is specified in section 288(b) to the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Approving financial statements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Board of Directors approval for transactions and actions that require the Board of Directors' approval subject to sections 255 and 268 to 275 to the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Board of Directors may create committees for the subjects specified in subsections (a) (1) – (7) above, for recommendation only.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) There shall be no person on a Board of Directors committee to which the Board of Directors has delegated authorities who is not a Board of Directors member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Those who are not Board of Directors members may serve on a Board of Directors committee where its sole function is to advise or offer a recommendation to the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;98. A resolution passed or action taken on a Board of Directors committee subject to the authority delegated thereto from the authorities of the Board of Directors, constitutes a resolution passed or action taken by the Board of Directors, unless otherwise explicitly determined by the Board of Directors with regard to a certain matter or certain committee. The Board of Directors may from time to time extend, reduce or revoke the delegation of powers to a Board of Directors committee, however a reduction or revocation of powers as aforementioned shall not derogate from the validity of a committee's resolution which the Company acted pursuant thereto towards another person, where it was unaware of the revocation thereof.

99. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.1. The legal quorum for opening a meeting of a Board of Directors committee will be two committee members serving on the date of the meeting, or their substitutes, as long as the Board of Directors had not determined otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.2. The provisions included in these Articles of Association regarding the actions of the Board of Directors shall apply, mutatis mutandis, to the Board of Directors committees as well, as long as no replacement provisions were given in this matter by the Board of Directors, and all subject to the provisions of the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.3. The Board of Directors committee will regularly report to the Board of Directors regarding its resolutions or recommendations.

100. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.1. The Board of Directors will appoint among its members an audit committee. The number of members of the audit committee shall be no less than three and all of the external directors shall be its members. The following will not be members of the audit committee: the chairperson of the Board of Directors, any director employed by the Company or who routinely provides services thereto, and the Company's controlling shareholder or his relative.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;100.2. The functions of the audit committee will be as prescribed by the Companies Law including any other function instructed by the Board of Directors.

**<u>FUNCTIONS OF THE BOARD OF DIRECTORS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;101. Subject to the provisions of the Company Articles of Association, the Board of Directors may convene to execute its duties, defer its meetings and regulate its actions and deliberations as it deems fit.

&nbsp;&nbsp;&nbsp;&nbsp;102. The Board of Directors will appoint one of its members to serve as the chairperson of the Board of Directors and it may appoint more than one Board of Directors chairperson (each of them shall be hereinafter referred to as the "Board of Directors Chairperson"). In addition, the Board of Directors may remove the Board of Directors Chairperson from office and appoint another in lieu thereof. The Board of Directors may appoint from among its members one or more as the vice chairperson of the Board of Directors, who will serve as his replacement when absent. The Board of Directors may determine the timeframe for the Board of Directors Chairperson and his vice chairpersons' service. If such period is not determined as aforesaid, the Board of Directors Chairperson and vice chairpersons will serve as long as they serve as directors.

&nbsp;&nbsp;&nbsp;&nbsp;103. The Board of Directors Chairperson will head the Board of Directors meetings and manage them. If the Board of Directors Chairperson is absent from a Board of Directors meeting, following a notice he had delivered in advance, or if he does not appear at the Board of Directors meeting within 15 minutes from the time scheduled for holding the meeting, then the vice chairperson (if such was appointed) shall head the meeting. If both the Board of Directors Chairperson and the vice chairperson are absent from the meeting the attending Board of Directors members will choose one of those among them to be the chairperson of the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;104. The Board of Directors will convene for its meeting according to the Company's needs and at least once every three months.

&nbsp;&nbsp;&nbsp;&nbsp;105. The Board of Directors Chairperson may convene the Board of Directors at any time, and determine the place and time for holding the Board of Directors meeting.

&nbsp;&nbsp;&nbsp;&nbsp;106. Without derogating from the aforementioned, the Board of Directors Chairperson is obligated to convene the Board of Directors upon the occurrence of each of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;106.1. Receiving a demand to convene the Board of Directors from at least two directors, in order to deliberate the subject specified in their demand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;106.2. Receiving notice or a report from the CEO which require the Board of Directors' action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;106.3. Receiving notice from the auditor regarding material flaws in the Company's auditing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;106.4. Receiving notice from a director regarding the Company which prima facie contains an illegality or disruption of the regular course of business.

Upon receiving notice or a report as abovementioned, the Board of Directors Chairperson will convene the Board of Directors, immediately, and no later than 14 days after the date of the demand, the notice or the report, as the case may be.

107. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;107.1. Early notice regarding the convening of the Board of Directors will be given to all members of the Board of Directors a reasonable time before the date of the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;107.2. Notwithstanding the abovementioned, the Board of Directors may, with the consent of all of the directors, convene a meeting without notice.

&nbsp;&nbsp;&nbsp;&nbsp;108. The agenda of the Board of Directors meetings will be determined by the Board of Directors Chairperson, and it will include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;108.1. Subjects determined by the Board of Directors Chairperson;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;108.2. Subjects determined as stated in Article 106 above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;108.3. Any subject which a director or the CEO requested that the Board of Directors Chairperson, a reasonable time before convening the Board of Directors meeting, include on the agenda (hereinafter referred to as the "Agenda").

&nbsp;&nbsp;&nbsp;&nbsp;109. The notice regarding the convening of the Board of Directors will state the time and location of the meeting as well as a reasonable specification of the matters that will be discussed at the meeting, according to the Agenda.

&nbsp;&nbsp;&nbsp;&nbsp;110. Notice regarding a Board of Directors meeting will be delivered to the address of the director given in advance to the Company, unless the director requests that the notice be delivered elsewhere.

&nbsp;&nbsp;&nbsp;&nbsp;111. The legal quorum for opening a Board of Directors meeting is half of the Board of Directors members serving at the time of the meeting, themselves or their proxies, or three members, according to the lower number.

112. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;112.1. At a Board of Directors vote each director will have one vote. Board of Directors resolutions will be passed by a majority of votes of the directors attending the meeting and voting therein, without taking into account the abstaining votes. The Board of Directors Chairperson will not have an additional or deciding vote.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;112.2. If the opinions are tied, the proposed resolution on which the Board of Directors members have voted will be deemed to have been rejected.

&nbsp;&nbsp;&nbsp;&nbsp;113. The Board of Directors may hold meetings with the use of any means of communication provided that each of the participating directors can hear each other simultaneously. The Board of Directors may regulate the manner and methods of holding a meeting through the use of means of communication.

&nbsp;&nbsp;&nbsp;&nbsp;114. The Board of Directors may pass resolutions even without convening in practice, provided that all of the directors entitled to participate in the deliberation and vote in the subject of the resolution have agreed not to convene for a meeting regarding said subject. The resolutions passed subject to this section, including the resolution not to convene, will be signed by the Board of Directors Chairperson and will be valid, for all intents and purposes, as if passed in a duly convened and conducted Board of Directors meeting.

**<u>MINUTES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;115. The Board of Directors will ensure that minutes will be recorded of the proceedings at the Board of Directors meetings; the minutes will be recorded in books designated for this purpose, and will include, inter alia, the following details:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;115.1. The names of the participating directors and other persons in attendance at each Board of Directors meeting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;115.2. The matters discussed at the Board of Directors meetings and the resolution that were passed. The minutes will be signed by the Board of Directors Chairperson or the chairperson of the meeting, as the case may be; approved and signed minutes, as aforementioned, will serve as prima facie evidence to its content.

&nbsp;&nbsp;&nbsp;&nbsp;116. The provisions of Article 115 above, shall apply as well to the meetings of each Board of Directors committee and the passing of Board of Directors resolutions without convening, as stated in Article 114 above.

**<u>THE CEO</u>**

&nbsp;&nbsp;&nbsp;&nbsp;117. The Board of Directors may, from time to time, appoint a CEO to the Company, and it may appoint more than one CEO (each of them hereinafter referred to as the "CEO"). In addition, the Board of Directors is entitled to dismiss the CEO or replace him, as it deems fit, subject to the provisions of aby contract between the CEO and the Company.

&nbsp;&nbsp;&nbsp;&nbsp;118. The CEO is not required to be a Company shareholder or a director.

&nbsp;&nbsp;&nbsp;&nbsp;119. The CEO is responsible for the regular management of the Company affairs, within the framework of the policy determined by the Board of Directors and subject to its instructions.

&nbsp;&nbsp;&nbsp;&nbsp;120. The CEO will have all administrative and executive powers not granted by law or by these Articles of Association or subject thereto to a different organ of the Company except for powers as aforementioned transferred therefrom to the Board of Directors, subject to the provisions of Article 93.1 above, if transferred; the CEO will be subject to the Board of Directors' supervision.

&nbsp;&nbsp;&nbsp;&nbsp;121. Subject to the provisions of the Companies Law and the provisions of these Articles of Association, the Board of Directors may, from time to time, deliver and grant to the CEO powers vested in the Board of Directors subject to these Articles of Association, as it deems fit, and it may grant from these powers for such period, purposes, and subject to the same conditions and with the same restrictions as the Board of Directors shall deem fit, and the Board of Directors may grant these powers, both without waiving its own powers in the matter and instead or in lieu thereof, all or some, and it may from time to time cancel, revoke and amend these powers, all or some.

&nbsp;&nbsp;&nbsp;&nbsp;122. The CEO may, with the Board of Directors' approval, delegate its powers, to another or to others, subordinate thereto; such approval may be given whether as a general approval or ad hoc.

&nbsp;&nbsp;&nbsp;&nbsp;123. Without derogating from the provisions of the Companies Law or any law, the CEO will submit to the Board of Directors reports in the subject, on the dates and at the scope determined by the Board of Directors, whether in a specific resolution or as part of the Board of Directors protocols.

&nbsp;&nbsp;&nbsp;&nbsp;124. The CEO's fee may be paid by paying a salary or commission fees or profit participation or by granting securities or the right to purchase securities, or in any other way.

**<u>VALIDITY OF ACTIONS AND APPROVAL OF TRANSACTIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;125. Subject to the provisions of any law, all actions taken by the Board of Directors or a Board of Directors committee or any person acting as director or as member of a Board of Directors committee or by the CEO, as the case may be – will be valid even if at a later time any flaw is discovered in the appointment of the Board of Directors, the Board of Directors committee, the director, committee member or CEO, as the case may be, or if any of the aforementioned officers was barred from serving in his position.

126. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;126.1. A position at any other corporation, including a corporation which the Company is an interested party therein or which is a shareholder in the Company, will not disqualify the officer from being an officer of the Company. In addition, no officer shall be disqualified from being an officer of the Company due to his entering into an agreement or the entering into an agreement of any corporation as abovementioned, with the Company in any matter whatsoever and by any means whatsoever.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;126.2. Subject to the provisions of the Companies Law, the fact that a person is an officer of the Company shall not disqualify him and/or his relative and/or another corporation which he is an interested party therein from executing transactions with the Company in which the officer has a personal interest in any way.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;126.3. Subject to the provisions of the Companies Law, an officer will be entitled to participate and vote in deliberations regarding the approval of transactions or actions in which he has a personal interest.

&nbsp;&nbsp;&nbsp;&nbsp;127. Subject to the provisions of the Companies Law, a transaction between the Company and its officer or controlling shareholder or a transaction between the Company and another person in which a Company officer or its controlling shareholder have a personal interest therein, and which are not extraordinary transactions, shall be approved as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;127.1. An agreement as abovementioned, in a transaction that is not extraordinary, will be approved by the Board of Directors, unless it was determined by the Board of Directors that the agreement will be approved by the audit committee, whether in a specific resolution or as part of the Board of Directors proceedings, whether by general authorization or authorization for a specific type of transaction, or whether by authorization for a specific transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;127.2. Approval of transactions which are not extraordinary as abovementioned can be done by granting general approval for a certain type of transactions or by approving a certain transaction.

&nbsp;&nbsp;&nbsp;&nbsp;128. Subject to the provisions of the Companies Law, general notice given to the Board of Directors by an officer or controlling shareholder of the Company, regarding his personal interest in a certain entity, while specifying his personal interest, shall constitute disclosure of the officer or controlling shareholder to the Company regarding his aforesaid personal interest, for the purpose of any agreement with an entity as abovementioned, in a transaction that is not extraordinary.

**<u>SIGNING ON BEHALF OF THE COMPANY</u>**

&nbsp;&nbsp;&nbsp;&nbsp;129. Subject to the provisions of the Companies Law and the provisions of these Articles of Association, the Board of Directors may authorize any person to act and sign on behalf of the Company, whether alone or jointly with another person, whether as a general matter or for specific matters.

&nbsp;&nbsp;&nbsp;&nbsp;130. The Company will have a seal bearing the Company name. Signing a document will not bind the Company unless those authorized to sign on behalf of the Company have signed it together with the Company seal or its printed name.

**<u>APPOINTING A LEGAL REPRESENTATIVE</u>**

&nbsp;&nbsp;&nbsp;&nbsp;131. Subject to the provisions of the Companies Law, the Board of Directors may, at any time, grant Power of Attorney to any person to be the Company's legal representative for such purposes and with such powers and discretion, for the period and subject to the terms, all as the Board of Directors shall deem fit.

The Board of Directors is entitled to grant to said person, inter alia, the power to transfer to another, fully or partially, the powers, authorizations and discretion granted thereto.

**<u>EXEMPTION, INDEMNITY AND INSURANCE</u>**

&nbsp;&nbsp;&nbsp;&nbsp;132. Subject to the provisions of the Companies Law, the Company may exempt its officer from his liability, all or some, due to damage following the breach of his duty of care towards the Company.

&nbsp;&nbsp;&nbsp;&nbsp;133. Subject to the provisions of the Companies Law, the Company may enter into a contract to insure the liability of its officer, due to the liability imposed thereon following an action which he performed while serving as its officer, in each of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.1. Breach of his duty of care towards the Company or towards another person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.2. Breach of his fiduciary duty towards the Company, provided that the officer acted bona fide and he had reasonable grounds to assume that the action will not harm the Company's interests;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.3. A monetary obligation imposed thereon in favor of another person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.4. Another action permitted to be insured by the Companies Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.5. Expenses paid by the officer or which he was ordered to pay, in connection with an administrative enforcement proceeding held in his case, including reasonable litigation expenses, and including legal fees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.6. Payment to the person injured by the breach as stated in section 52ND to the Securities Law, as it was amended in the Improvement of Enforcement Proceedings Law (hereinafter referred to as the "Payment to the Person Injured by the Breach");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;133.7. Any other event for which it is permitted and/or will be permitted to insure the liability of an officer.

&nbsp;&nbsp;&nbsp;&nbsp;134. Subject to the provisions of the Companies Law –

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;134.1. The Company may grant an undertaking in advance to indemnify its officer, due to liability or an expense imposed thereon or which he will pay due to an action which he performed as a result of him being its officer, in each of the following (hereinafter referred to as the "Indemnity Undertaking") –

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) As specified in Article 136.1 below, and provided that the Indemnity Undertaking is limited to events which in the opinion of the Board of Directors are expected in light of the Company's activity de facto at the time of granting the Indemnity Undertaking and to a sum or standard which the Board of Directors determined to be reasonable under the circumstances, and that the Indemnity Undertaking states the events which in the Board of Directors' opinion are expected in light of the Company's activity de facto at the time of granting the undertaking and the sum or standard which the Board of Directors deemed reasonable under the circumstances. The indemnity sum will be limited only to sums not covered by the insurance and which were not paid de facto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) As specified in Articles 135.2 or 135.3 or 135.4 or 135.5 below, the indemnity sum will be limited only to sums not covered by the insurance and not paid de facto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;134.2. Without derogating from the content of Article 134.1 above, the Company may indemnify its officer retroactively, due to liability or an expense as specified in article 136 below, imposed thereon as a result of on action which he performed as a Company officer. The indemnity sum will be limited only to sums not covered by the insurance and not paid de facto.

&nbsp;&nbsp;&nbsp;&nbsp;135. An Indemnity Undertaking or indemnity, as stated in article above, may be given due to liability or an expense as specified in subsections 135.1 to 135.6 below, imposed on the officer due to an action which he performed as a Company officer, as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.1. Monetary obligation imposed thereon in favor of another person pursuant to a legal judgment, including a judgment rendered by settlement or an arbitration award approved by the court.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.2. Reasonable litigation expenses, including legal fees, paid by the officer due to an investigation or proceeding held against him by an entity authorized to hold an investigation or proceeding, and which ended without an indictment thereagainst and without imposing a monetary obligation thereupon as an alternative for a criminal proceeding, or which ended without an indictment thereagainst but with the imposing of a monetary obligation thereupon as an alternative to a criminal proceeding in an offense that does not require proving mens rea; in this section – "proceeding ending without an indictment in a matter in which a criminal investigation was held" – meaning the closing of the case subject to section 62 to the Rules of Criminal Procedure [combined version], 5742 – 1982 (in this subsection – "Criminal Procedure Law") or a stay of proceedings by the Attorney General subject to section 231 to the Criminal Procedure Law.

"Monetary obligation as an alternative to a criminal proceeding" – monetary obligation imposed by law as an alternative to the criminal process, including an administrative fine subject to the Administrative Offenses Law, 5745- 1985, a fine for an offense determined as a fineable offense subject to the Criminal Procedure Law, financial sanction or forfeit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.3. Reasonable litigation expenses, including legal fees, which the officer paid or was ordered to pay by the court, in a process submitted thereagainst by the Company or on its behalf or by another person, or in a criminal indictment from which he was acquitted, or in a criminal indictment where he was convicted of an offense that does not require proof of mens rea.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.4. Expenses paid by the officer or which he was ordered to pay, in connection with an administrative enforcement proceeding held in his case, including reasonable litigation expenses, and thus including legal fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.5. Payment to the Person Injured by the Breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;135.6. Any liability or other expense for which it is permitted and/or will be permitted to indemnify the officer.

&nbsp;&nbsp;&nbsp;&nbsp;136. Subject to the provisions of the Companies Law –

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;136.1. The Company is entitled to grant an undertaking in advance to indemnify any person including a Company officer, who serves or has served the Company or as per its request as a director in another company which the Company has shares therein, directly or indirectly, or which the Company has any interest whatsoever therein (hereinafter referred to as the "Director in Another Company"), subject to the provisions of Article 134 above, which shall apply mutatis mutandis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;136.2. Without derogating from Article 136.1 above, the Company may indemnify the Director in Another Company retroactively, due to liability or expense as specified in Article 136 above, imposed thereon due to an action he performed pursuant to his being a Director in Another Company.

&nbsp;&nbsp;&nbsp;&nbsp;137. Subject to the provisions of the Companies Law, the Company may grant an undertaking in advance to indemnify an employee or clerk of the Company who is not a Company officer or indemnify him retroactively for any monetary liability imposed thereon in favor of another person due to an action performed bona fide within his capacity as Company employee or clerk.

&nbsp;&nbsp;&nbsp;&nbsp;138. Subject to the provisions of the Companies Law, the provisions of the Company's Articles of Association do not limit the Company, in any manner whatsoever, with regard to its entering into an insurance contract, or with regard to the granting of exemption or indemnity:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;138.1. In connection with a Company officer or Director in Another Company, if the insurance, exemption or indemnity are not prohibited subject to any law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;138.2. In connection with a person who is not a Company officer or Director in Another Company, including however without derogating from the generality of the aforementioned, employees, contractors or consultants.

**<u>DIVIDENDS, FUNDS AND CAPITALIZATION OF FUNDS AND PROFITS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;139. The Board of Directors may, prior to deciding upon dividend distribution, as stated in Article 143 below, contribute out of the profits any sums, subject to its discretion, to a general or reserve fund for the distribution of a dividend, bonus shares, or any other purpose, as the Board of Directors shall determine subject to its discretion.

&nbsp;&nbsp;&nbsp;&nbsp;140. Until utilizing the aforementioned funds, the Board of Directors may invest the sums contributed as aforementioned and the monies of the funds, in any investment whatsoever, to manage these investments, change them or make any other use thereof, and it is entitled to divide the reserve fund into special funds, and use any fund or part thereof for the purpose of the Company's business, without holding it separate from the rest of the Company's assets, all subject to the Board of Directors' discretion and the terms it shall determine.

&nbsp;&nbsp;&nbsp;&nbsp;141. Subject to the provisions of the Companies Law, the Board of Directors may pass a resolution regarding the distribution of a dividend. The Board of Directors deciding upon the distribution of a dividend may decide that the dividend will be paid, all or some, in cash or by distribution of assets in kind, and thus including securities or by any other means, as it deems fit.

142. 142.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the provisions of the Companies Law, the Board of Directors may decide upon the allotment of bonus shares, and turn into share capital some of the Company profits, as this is construed in section 302(b) to the Companies Law, from share premium or any other source included in its equity, stated in its most recent financial statements, at the sum determined by the Board of Directors and which shall be no less than the par value of the bonus shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Board of Directors deciding upon the allotment of bonus shares, will determine whether they will be of one class only for all shareholders without taking into account the classes of shares held thereby or that each shareholder as aforementioned will be distributed bonus shares of the same class for all classes of shares held thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Bonus shares allotted subject to this section will be deemed fully paid-up.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;142.2. The Board of Directors deciding upon the allotment of bonus shares may decide that the Company will transfer to a special fund designated for the future distribution of bonus shares, such an amount which the conversion thereof into share capital will suffice in order to allot to anyone who at the time will have, for any reason whatsoever, the right to purchase Company shares (including a right which can only be activated on a later date), bonus shares which would have been owed thereto, had he exercised the right to purchase the shares prior to the effective date for the right to receive bonus shares (in this section the "Effective Date"). If after the Effective Date the owner of the aforementioned right will exercise his right to purchase the shares or part thereof the Company will allot thereto bonus shares of par value and which have been owed thereto had he exercised prior to the Effective Date the right to purchase the shares which he had purchased de facto, and thus by converting into share capital the proper amount out of the aforementioned special fund. The bonus shares will entitle their owners to participate in the dividend distribution in cash or the bonus shares as of the Effective Date determined by the Board of Directors. For the purpose of determining the amount that should be transferred to the aforementioned special fund, any amount transferred to this fund due to previous distributions of bonus shares shall be deemed as if it were already capitalized and that shares entitling the owners of the right to purchase shares, to bonus shares, were already allotted therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;143. Subject to the provisions of the Articles of Association, if at any time the Company is permitted under the Companies Law to make any distribution to its shareholders, prior and in preference to any dividend or distribution made to holders of Ordinary Shares, the Company may, at its election, redeem Preferred Shares by making payments (each such payment, a "Redemption Payment") from time to time to the holders of Preferred Shares up to an aggregate value of $34,000 per Preferred Share (the "Preferred Redemption Amount"). If any such Redemption Payment shall be insufficient to pay the Preferred Redemption Amount of all Preferred Shares, the Company shall redeem from each holder of Preferred Shares a number of Preferred Shares determined on a *pari passu* basis in proportion to the number of Preferred Shares held by such holder. No Preferred Shares shall be redeemed on a fractional basis, and in the event a Redemption Payment would result in a fractional Preferred Share of any holder to be redeemed, the number of Preferred Shares of such holder to be redeemed shall be rounded down to the nearest whole Preferred Share. Following the payment in full of the Preferred Redemption Amount for any Preferred Shares, such shares shall immediately be deemed redeemed and cancelled without any further action required on the part of the Preferred Shareholders or the Company. For the avoidance of doubt, no dividends or distributions shall be made to holders of Ordinary Shares until an amount equal to the full Preferred Redemption Amount has been distributed on account of each Preferred Share.

&nbsp;&nbsp;&nbsp;&nbsp;144. Subject to the rights attached to the classes of shares issued by the Company and the provisions of the Articles of Association, if at any time the Company is permitted under the Companies Law to make any distribution to its shareholders, subject to and following payment in full of the Preferred Redemption Amount as described in Article 143, it may, at its election, pay any dividends or issue bonus shares, if any, to Ordinary Shares on a pro rata basis with all other Ordinary Shares, without taking into account any premium paid therefor. In order to implement a resolution regarding the distribution of a dividend or allotment of bonus shares the Board of Directors may:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.1. Settle as it deems fit any difficulty arising in connection therewith and take any action it chooses in order to overcome such difficulty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.2. Decide that fractions or fractions at a sum lower than a certain sum determined by the Board of Directors, will not be taken into account in order to adjust the right of shareholders or sell share fractions and pay the (net) consideration to those entitled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.3. Authorize to sign on behalf of the shareholders any contract or other document required in order to validate the allotment and/or distribution, and especially, authorize to sign and submit for registration a document as stated in section 291 to the Companies Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.4. Determine the value of certain assets for distribution and decide that payments in cash will be paid to the shareholders based on the determined value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.5. Grant cash or certain assets to trustees in favor of those entitled thereto, as the Board of Directors deems advantageous.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;144.6. Make any arrangement or other settlement required in the Board of Directors' opinion in order to enable the allotment, or distribution, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;145. Dividend or other benefits due to shares shall not bear interest.

&nbsp;&nbsp;&nbsp;&nbsp;146. The Board of Directors may withhold any dividend or bonus share or other benefits due to a share which the consideration determined therefor, all or some, was not paid to the Company, and collect any sum as aforementioned or consideration received from the sale of any bonus share or other benefit, on account of the debts or undertakings due to the aforementioned share, thus, whether the aforesaid share is exclusively owned by the indebted shareholder or jointly with other shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;147. The Board of Directors may withhold any dividend or bonus share or other benefits due to a share for which a person is entitled to be registered as its owner in the ledger or is entitled to transfer it, subject to articles 29 or 31 above, as the case may be, until the same person is registered as the owner of the share or until he duly transfers it, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;148. The Board of Directors may determine, from time to time, the methods of payment of the dividends or allotment of bonus shares or their transfer to those entitled thereto and as well the instructions, procedures, and arrangements in connection therewith, both with regard to the registered shareholders and as well with regard to the non-registered shareholders. Without derogating from the generality of the aforementioned, the Board of Directors may determine as follows:

148.1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the content of subsection (b) below, a dividend or monies distributed to registered shareholders will be paid to a registered shareholder by mailing a check to his address, as it is registered in the shareholder ledger, or in the event of joint registered owners of a share, to the person whose name appears first in the shareholder ledger with respect to said share. Any delivery of a check as aforementioned will be done at the risk of the registered shareholder; without derogating from the aforementioned, the Board of Directors may determine that a dividend sum lower than a certain sum determined by the Board of Directors will not be delivered by check as abovementioned and the provisions of subsection (b) below shall apply in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Board of Directors may determine that the payment of a dividend or monies distributed to registered shareholders shall be done at the office or any other place determined by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) A dividend the payment of which was not demanded within a period of seven (7) years from the date on which its distribution was decided upon, the person entitled thereto will be deemed to have waived it and it will return to the ownership of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;148.2. A dividend distributed to non-registered shareholders will be transferred to the aforementioned shareholders through the Registration Company or by any other means determined by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;149. If two or more are registered in the ledger as the joint owners of a share, each of them is entitled to provide a valid receipt against any dividend, share or other security, or other monies or benefits owing on account of the share.

**<u>COMPANY DOCUMENTS</u>**

150. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;150.1. The shareholders will have the right to review the Company documents specified in section 184 to the Companies Law, upon the fulfillment of the conditions determined for this purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;150.2. Without derogating from the content of article 151.1 above, the Board of Directors may, subject to its discretion, decide to grant a reviewing right of the Company documents, or any part thereof, including to the shareholders, all or some, as it deems fit, subject to its discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;150.3. The shareholders will not have the right to review the Company documents or part thereof, unless such right was awarded thereto by law or subject to these Articles of Association or if they were permitted to do so by the Board of Directors, as stated in article 151.2 above.

&nbsp;&nbsp;&nbsp;&nbsp;151. Subject to the provisions of any law, any book, ledger or other registry which the Company must keep, subject to any law or these Articles of Association, will be kept using technical, mechanical, or other means, as shall be decided by the Board of Directors.

**<u>FINANCIAL STATEMENTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;152. The Company's financial statements will be approved by the Board of Directors, signed on its behalf by anyone authorized to do so by the Board of Directors, and presented before the annual meeting.

**<u>AUDITOR</u>**

&nbsp;&nbsp;&nbsp;&nbsp;153. The auditor or auditors will be appointed at each annual meeting, and serve until the end of the following annual meeting.

154. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;154.1. If an auditor is appointed to the Company, the Board of Directors will determine his fee for the auditing activity, subject to the discretion of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;154.2. The fee of the auditor for additional services to the Company which are not auditing activities, will be determined by the Board of Directors, subject to its discretion.

The Board of Directors will report to the annual meeting the terms of the agreement with the auditor for additional services including payments and undertakings of the Company towards the auditor; for the purpose of this article, an "auditor" – including a partner, employee or relative of the auditor and including a corporation controlled thereby.

**<u>THE INTERNAL AUDITOR</u>**

154a.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company Board of Directors will appoint an internal auditor for the Company, subject to the suggestion of the audit committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The organizational supervisor of the internal auditor will be the chairperson of the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The internal auditor will submit to the Board of Directors for its approval, or, subject to the Board of Directors' determination from time to time, to the audit committee, a proposal for an annual or periodic work plan, and the Board of Directors or audit committee, as the case may be, will approve it with the changes they deem fit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The internal auditor will act in accordance with the provisions of the Companies Law.

**<u>NOTICES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;155. Providing notices or delivering documents to the shareholders and the Registration Company, subject to the provisions of the Law or subject to the Articles of Association, will be done in one of the ways mentioned below in this chapter.

&nbsp;&nbsp;&nbsp;&nbsp;156. Notice regarding a General Meeting will be delivered as stated in Article 54 above.

&nbsp;&nbsp;&nbsp;&nbsp;157. Without derogating from the aforementioned, the Company may deliver notice or a document to a shareholder, by delivering it in person or by facsimile or by post or by e-mail; delivery by post shall be done in accordance with the address of the shareholder registered in the ledger, or if no such address is registered, in accordance with the address given to the Company thereby for the purpose of delivering notices thereto. A notice delivered by facsimile transmission will be sent to the shareholder in accordance with the facsimile number given thereby to the Company. A notice delivering by e-mail will be sent to the shareholder in accordance with the e-mail address given thereby to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. A notice or document delivered personally to a shareholder will be deemed delivered on the date they were delivered thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. A notice or document delivered by post will be deemed duly delivered if submitted to a post office bearing the correct address and duly stamped. The delivery will be deemed as if performed at the time when the letter would have been regularly delivered by the postal service, and no more than two days from the date on which the letter containing the aforesaid notice was delivered to the post office.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. A notice sent by facsimile or e-mail will be deemed delivered twenty four hours after their transmission.

&nbsp;&nbsp;&nbsp;&nbsp;158. Without derogating from the abovementioned, the Company may deliver a notice to the shareholders by publishing the notice once in two daily newspapers published in Israel, in the Hebrew language, both in addition and in lieu of delivering the notice as stated in Article 157 above. The date of publication in the newspaper shall be deemed the date on which the notice was received by the shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;159. The Company may announce the delivery of a document at the office or any other place determined by the Board of Directors or by any other means, including through the internet.

&nbsp;&nbsp;&nbsp;&nbsp;160. The Company is entitled to deliver notice or a document to joint owners of a share by sending them to the shareholder whose name is mentioned first in the shareholder ledger, with regard to that share.

&nbsp;&nbsp;&nbsp;&nbsp;161. Delivery of notice or a document to one of the family members living with the person for whom they are designated will be deemed personal delivery to the same person.

&nbsp;&nbsp;&nbsp;&nbsp;162. Any person who received the right to any share, by law, by transfer or by any other means, any notice with regard to that share, duly delivered to the person from whom the right to the same share originated, prior to the registration of his details in the ledger shall obligate him.

&nbsp;&nbsp;&nbsp;&nbsp;163. Any document or notice delivered to a Company shareholder, in accordance with the provisions of the Articles of Association, will be deemed duly delivered despite the event of death, insolvency or dissolution of the same shareholder or endorsement of the right to his shares, by law (whether if the Company was aware of this or otherwise), as long as no one was registered in lieu thereof as shareholder, and delivery or shipment as aforementioned will be deemed for any purpose as sufficient with regard to any person interested in the same shares and/or entitled thereto subject to the endorsement of the right, by law, whether jointly with the same shareholder or as a result thereof or in lieu thereof.

&nbsp;&nbsp;&nbsp;&nbsp;164. Subject to the provisions of any law, a shareholder, director or any other person, entitled to receive notice subject to the Articles of Association or by law, may waive the right to receive it, whether in advance or in retrospect, whether for a specific event or in general, and once he does so this will be considered as if the notice was duly delivered, and any proceeding or action for which notice should have been given will be deemed valid and in force.

&nbsp;&nbsp;&nbsp;&nbsp;165. Written confirmation signed by a director or by the Company secretary regarding the delivery of a document or notice by any of the method specified in the Articles of Association, will be deemed decisive proof regarding any detail included therein.

&nbsp;&nbsp;&nbsp;&nbsp;166. Whenever early notice of a number of days must be granted or when a notice is valid during a certain period, the date of delivery will be included among the count of the number of days or the period, except if otherwise determined. If notice is given in more than one of the methods specified above, it will be deemed delivered on the earliest date for which it would be deemed delivered, as abovementioned.

**<u>MERGER</u>**

&nbsp;&nbsp;&nbsp;&nbsp;167. The approval of a merger as stated in section 327 of the Companies Law requires, in addition to any approval set forth in Article 172 below, an ordinary majority at the General Meeting or a class meeting, as the case may be, and all subject to the provisions of any law.

**<u>CONVERSION OF PREFERRED SHARES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;168. <u>Conversion</u>. Each holder of Preferred Shares (the "Preferred Shareholders") shall have the right to convert its Preferred Shares into Ordinary Shares as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168.1. <u>Right to Convert</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Each Preferred Share shall be convertible, at the option of the Preferred Shareholder, at any time after the issuance of such Preferred Share and without the payment of additional consideration by the holder thereof, into 1,456,000 fully paid and nonassessable Ordinary Shares of the Company, as subject to adjustment pursuant to Article 168.2 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Before any Preferred Shareholder is entitled to convert any Preferred Share into Ordinary Shares, the Preferred Shareholder shall surrender the certificate or certificates thereof, or an affidavit of loss of the certificate or certificates therefor in a form reasonably acceptable to the Company, duly executed at the Office and shall give written notice by electronic mail or facsimile to the Company at an address to be provided by the Company of the election to convert the same (a "Notice of Exercise"). The Company shall, as soon as practicable thereafter, register with the transfer agent of the Company the number of Ordinary Shares to which such Preferred Shareholder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate or submission of the affidavit of loss of the certificate representing the Preferred Shares to be converted, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Ordinary Shares as of such date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168.2 <u>Recapitalization Event</u>. If at any time or from time to time there shall be a Recapitalization Event, and other than a Liquidation (as defined below), provision shall be made so that the Preferred Shareholders shall thereafter be entitled to receive upon conversion of the Preferred Shares the number of Ordinary Shares had the Preferred Shares been converted into Ordinary Shares immediately prior to such Recapitalization Event. For the purposes of this Article 168.2, "Recapitalization Event" means any event of share combination or subdivision, share split, reverse share split, share dividend, distribution of bonus shares or any other reclassification, reorganization or recapitalization of the Ordinary Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168.3 Notwithstanding any of the foregoing, Preferred Shares shall not be convertible into Ordinary Shares, and the Company shall not effect any such conversion, to the extent (but only to the extent) that by giving effect to such conversion the Preferred Shareholder (together with its affiliates and any other persons acting as a group together with the Preferred Shareholder or any of such holder's affiliates (such persons, collectively, the "Attribution Parties")) (i) would beneficially own in excess of 4.99% of the issued and outstanding Ordinary Shares (including Ordinary Shares underlying American Depositary Shares of the Company ("ADSs")) (the "Beneficial Ownership Limitation") or (ii) the Attribution Parties will have received or would have been entitled to receive upon such conversion, together with all other conversion by such Attribution Parties within the twelve (12)-month period immediately prior to such conversion, an aggregate number of Ordinary Shares in excess of 4.99% of the number of Ordinary Shares (including Ordinary Shares underlying ADSs) then issued and outstanding at the time of such conversion (the "Conversion Limitation"). In addition, a holder of Preferred Shares may not convert any such shares for a period of twelve (12) months commencing on the original date of issuance of the Preferred Shares to such holder. For purposes of the Beneficial Ownership Limitation, the number of Ordinary Shares beneficially owned by the Preferred Shareholder and its affiliates and Attribution Parties shall include the number of Ordinary Shares underlying ADSs, if any, held by the Preferred Shareholder and its Attribution Parties plus the number of Ordinary Shares issuable upon conversion of the Preferred Shares with respect to which the conversion is being made but shall exclude the number of Ordinary Shares which would be issuable upon (i) exercise of the remaining Preferred Shares beneficially owned by the Preferred Shareholder or any of its affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Ordinary Share equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein that are beneficially owned by the Preferred Shareholder or any of its affiliates or Attribution Parties. Except as set forth in the preceding sentence, for the purposes of this Article 168.3, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act, and the Preferred Shareholder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitations contained in this Article 168.3 applies, the determination of whether Preferred Shares are convertible (in relation to other securities owned by the Preferred Shareholder together with any affiliates and Attribution Parties) shall be in the sole discretion of the Preferred Shareholder, and the submission of a Notice of Exercise shall be deemed to be the holder's determination of whether the Preferred Shares are convertible (in relation to other securities owned by the holder together with any affiliates and Attribution Parties), in each case subject to the Beneficial Ownership Limitation or Conversion Limitation. To ensure compliance with this restriction, each holder shall be deemed to represent to the Company each time it delivers a Notice of Exercise that such Notice of Exercise has not violated the restrictions set forth in this Article, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Article 168.3, in determining the number of outstanding Ordinary Shares, the Preferred Shareholder may rely on the number of outstanding Ordinary Shares as reflected in (x) the Company's most recent Annual Report on Form 20-F, Report on Form 6-K or other public filing filed with the Commission, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Depositary setting forth the number of Ordinary Shares outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168.4 No fractional Ordinary Shares shall be issued upon conversion of the Preferred Shares, and the number of Ordinary Shares to be issued shall be rounded to the nearest whole share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;168.5 <u>Reservation of Shares Issuable upon Conversion</u>. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares, solely for the purpose of effecting the conversion of the Preferred Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Shares, and if at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all then outstanding Preferred Shares, then the Company will take such corporate action as may be necessary to increase its authorized but unissued Ordinary Shares to such number of shares as shall be sufficient for such purposes.

**<u>LIQUIDATION</u>**

&nbsp;&nbsp;&nbsp;&nbsp;169. Subject to the provisions of any law, the liquidator may, whether by voluntary liquidation or otherwise, subject to the resolution of a General Meeting passed by ordinary majority, to distribute in kind among the shareholders the surplus of assets, all or some, and as well the liquidator may subject to the resolution of the General Meeting passed by ordinary majority, to deposit any part of the assets surplus with trustees who will hold it in trust on behalf of the shareholders, as the liquidator shall deem fit. For the purpose of distributing the assets in kind, the liquidator may determine the proper value of the assets intended for distribution and determine how the distribution will be performed among the shareholders while taking into consideration the rights attached to the various classes of the Company shares which they own.

&nbsp;&nbsp;&nbsp;&nbsp;170. <u>Liquidation Preference</u>. In the event of: (i) any liquidation, dissolution, or winding-up of the Company, either voluntary or involuntary; (ii) any bankruptcy, insolvency or reorganization proceeding under any bankruptcy or insolvency or similar law, whether voluntary or involuntary, which is properly commenced by or against the Company, and which was not withdrawn and/or cancelled within 90 days from its commencement date; or (iii) the appointment of a receiver or liquidator to all or substantially all of the Company's assets (each of <u>Subsections (i)</u>, <u>(ii)</u> and <u>(iii)</u>, a "Liquidation"), then upon each such Liquidation, the assets or proceeds available for distribution or payment to the Shareholders (the "Distributable Proceeds") shall be distributed among the Shareholders according to the following order of preference:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) *<u>First</u>,* only to the extent that not all Preferred Shares have been redeemed pursuant to Article 143 above, each holder of unredeemed Preferred Shares shall be entitled to receive for each such Preferred Share held thereby, on a pari passu basis, prior and in preference to any payment made to the holders of the Ordinary Shares and/or any other securities of the Company, an amount per each such Preferred Share equal to the Preferred Redemption Amount (such amount, the "Liquidation Preference"). In the event that the Distributable Proceeds shall be insufficient for the distribution of the Liquidation Preference in full to each holder of Preferred Shares for each of the unredeemed Preferred Shares held thereby, the Distributable Proceeds shall be distributed among the holders of Preferred Shares on a pro rata, pari passu basis in proportion to the number of unredeemed Preferred Shares held by such holder. Following the payment in full of the Redemption Payments for all the Preferred Shares, all such shares shall immediately be deemed redeemed and cancelled without any further action required on the part of the Preferred Shareholders or the Company; <u>and</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) *<u>Second</u>* , after payment in full of the Liquidation Preference to the holders of the Preferred Shares for all Preferred Shares held thereby, the remaining Distributable Proceeds, if any, shall be distributed pro-rata among the holders of Ordinary Shares, on a pro-rata, *pari passu*, non-participating basis.

**<u>RIGHT OF FIRST REFUSAL</u>**

&nbsp;&nbsp;&nbsp;&nbsp;171. Each holder of Preferred Shares hereby unconditionally and irrevocably grants to the Company the right to purchase all or any Preferred Shares that such Holder may propose to transfer, at the same price and on the same terms and conditions, as those offered to any prospective transferee (the "Right of First Refusal"). Each holder of Preferred Shares proposing to make a proposed transfer, sale, disposition or other assignment (each, a "Transfer") of Preferred Shares must promptly deliver a notice (a "Notice of Transfer") to the Company prior to the consummation of such proposed Transfer, setting forth all the material terms and conditions (including price and form of consideration) of the proposed Transfer, the identity of the prospective transferee and the intended date of the proposed Transfer. To exercise the Right of First Refusal, the Company must deliver a notice to the holder of Preferred Shares proposing the Transfer within thirty (30) days after delivery of the proposing shareholder's Notice of Transfer specifying the number of Preferred Shares to be purchased by the Company. If the Company does not deliver such a notice to the proposing shareholder's notice by the end of the thirty (30) day period, the Company shall be deemed to have irrevocably waived its Right of First Refusal to purchase all or any portion of the Preferred Shares proposed to be transferred. If the Company does deliver such a notice to the proposing shareholder within such thirty (30) day period, then promptly thereafter the parties shall arrange the Transfer of the shares being acquired by the Company (as set forth in the notice), including the consideration to be paid by the Company for such shares, and in the event the Company has elected not to purchase all the shares included in the proposing shareholder's Notice of Transfer, then the proposing shareholder may Transfer such remaining shares to the proposed transferee on the terms set forth in the Notice of Transfer. The share certificate or certificates representing any Preferred Shares transferred hereunder shall contain a legend indicating that they are subject to the Transfer restrictions contained in these Articles and any other agreements between the holder of the Preferred Shares and the Company.

**<u>REDEMPTION IN CERTAIN EVENTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;172. Notwithstanding anything to the contrary in these Articles, for so long as any holder of Preferred Shares holds Preferred Shares of the Company, the Company shall not take any of the following actions (whether taken directly or indirectly, by merger, consolidation or otherwise, and whether by the Company or a subsidiary) without either first redeeming all then-outstanding Preferred Shares by making a Redemption Payment in respect of each Preferred Share in an amount equal to the Preferred Redemption Amount or obtaining the written consent or affirmative vote of the holders of a majority of the Preferred Shares in order to proceed without making such a redemption (it being understood that the foregoing shall not apply if any of the following occurs and is not in the control of the Company):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) consummating any M&A Event;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) taking any action or step in relation to the delisting of the Company's securities from the Nasdaq Stock Market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) authorizing the creation of any security having rights, preferences or privileges equal to or greater than those of the Preferred Shares, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the incurrence of any Indebtedness, save for Indebtedness incurred:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) with the prior written consent of the holders of a majority of the Preferred Shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) under any finance or capital leases of equipment if the aggregate liability in respect of the equipment leased does not at any time exceed EUR 10,000,000 (or its equivalent in another currency or currencies);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) under Permitted Hedging

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) under any letters of credit provided that such Indebtedness does not, singularly or in aggregate, exceed EUR 10,000,000 (or its equivalent in another currency or currencies);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in respect of any guarantees in respect of any liability or obligation of any person:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) with the prior written consent of the holders of a majority of the Preferred Shares; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) guarantees issued in the ordinary course of trade by the Company under or in connection with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) under any negotiable instruments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) in connection with any performance bond; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) in connection with any Indebtedness permitted under this Article 172(iv); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) not permitted by the preceding paragraphs and the outstanding amount of which does not exceed EUR 10,000,000 (or its equivalent) in aggregate at any time.

Following the payment in full of the Preferred Redemption Amount for any Preferred Shares, such shares shall immediately be deemed redeemed and cancelled without any further action required on the part of the Preferred Shareholders or the Company. For the avoidance of doubt, no dividends or distributions shall be made to holders of Ordinary Shares until an amount equal to the full Preferred Redemption Amount has been distributed on account of each Preferred Share.

## Exhibit 2.3

**Exhibit 2.3**

**DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF<br> THE SECURITIES EXCHANGE ACT OF 1934**

This section summarizes certain information regarding the ordinary shares, no par value (the "<u>Ordinary Shares</u>"), of BiondVax Pharmaceuticals Ltd. (the "<u>Company</u>") and the American Depositary Shares ("<u>ADSs</u>"), each representing 40 Ordinary Shares. The following descriptions are a summary and do not purport to be complete and is qualified by reference to our amended and restated articles of association (the "<u>Articles</u>"), which are filed with the Securities and Exchange Commission as an exhibit to our annual report on Form 20-F.

***General***

Our authorized share capital consists of 100,000,000,000 ordinary shares, no par value, and 1,000 preferred shares, no par value. All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights.

**Registration Number and Purposes of the Company**

Our number with the Israeli Registrar of Companies is 513436105. Our purpose is set forth in our Articles of Association is to engage in every lawful purpose in the field of biotechnology.

***Voting Rights***

 ****

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

Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors under the Israeli Companies Law.

***Transfer of Shares***

 ****

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

***The Powers of the Directors***

 ****

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

***Amendment of share capital***

 ****

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

***Dividends***

 ****

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

***Election of Directors***

Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors under the Israeli Companies Law.

Under our articles of association, our board of directors must consist of at least three and not more than eleven directors, including any external directors required by Israeli law. Our board of directors currently consists of ten members, including our non-executive Chairman of the board of directors. Our directors, excluding the external directors, are divided into three groups, as nearly equal in number as practicable, with staggered three-year terms, each consisting of one-third of the directors, constituting our entire board of directors (other than the external directors). At each annual meeting, the three-year duration of service of one group of directors shall expire and the directors of such group will stand for election. Each of the directors or the successors elected to replace the directors of a group whose term shall have expired at such annual meeting shall be elected to hold office until the third annual meeting held after the date of his or her election and until his or her respective successor is elected. If no directors are appointed at the annual meeting, the directors appointed at the previous annual meeting will continue their service. Directors whose service period has ended may be appointed again.

***Shareholder Meetings***

 ****

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

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

● amendments to our articles of association;

● appointment or termination of our auditors;

● appointment of directors and appointment and dismissal of external directors;

● approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;

● director compensation, indemnification and change of the principal executive officer;

● increases or reductions of our authorized share capital;

● a merger;

● the exercise of our board of directors' powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management; and

● authorizing the chairman of the board of directors or his relative to act as the company's chief executive officer or act with such authority; or authorize the company's chief executive officer or his relative to act as the chairman of the board of directors or act with such authority.

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

***Quorum***

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

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

***Resolutions***

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

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

● an appointment or removal of directors;

● an approval of transactions with office holders or interested or related parties, that require shareholder approval;

● an approval of a merger;

● authorizing the chairman of the board of directors or his relative to act as the company's chief executive officer or act with such authority; or authorize the company's chief executive officer or his relative to act as the chairman of the board of directors or act with such authority;

● any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate any additional matters; and

● other matters which may be prescribed by Israel's Minister of Justice.

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

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

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

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

***Access to Corporate Records***

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

***Acquisitions under Israeli Law***

*Full Tender Offer*

 

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

*Special Tender Offer*

 

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

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

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

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

*Merger*

 

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

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

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

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

*Antitakeover Measures*

 

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

**Transfer Agent and Depositary**

The transfer agent and registrar for our ordinary shares is Vstock Transfer, LLC. Our ADSs were issued pursuant to a Depositary Agreement entered into with The Bank of New York Mellon, which acts as depositary.

**AMERICAN DEPOSITARY SHARES**

The Bank of New York Mellon, as depositary, registered and delivered American Depositary Shares, also referred to as ADSs. Each ADS represents forty (40) ordinary shares (or a right to receive forty (40) ordinary shares) deposited with the principal Tel Aviv office of either of Bank Leumi or Bank Hapoalim, as custodian for the depositary. Each ADS also represents any other securities, cash or other property which may be held by the depositary. The depositary's office at which the ADSs are administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon's principal executive office is located at One Wall Street, New York, New York 10286.

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration System, or DRS, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

The DRS is a system administered by The Depository Trust Company, or DTC, under which the depositary may register the ownership of uncertificated ADSs, which ownership is confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.

As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs shareholder rights. The depositary will be the holder of the ordinary shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR.

**Dividends and Other Distributions**

***How will you receive dividends and other distributions on the shares?***

The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent.

**Cash**. The depositary will convert any cash dividend or other cash distribution we pay on the ordinary shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

Before making a distribution, the depositary will deduct any withholding taxes, or other required governmental charges. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.

**Shares**. The depositary may distribute additional ADSs representing any ordinary shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It may sell ordinary shares which would require it to deliver a fraction of an ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed ordinary shares sufficient to pay its fees and expenses in connection with that distribution.

**Rights to purchase additional shares***.* If we offer holders of our securities any rights to subscribe for additional ordinary shares or any other rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. *In that case, you will receive no value for them.*

If the depositary makes rights available to ADS holders, it will exercise the rights and purchase the ordinary shares on your behalf. The depositary will then deposit the ordinary shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the exercise price and any other charges the rights require you to pay.

U.S. securities laws may restrict transfers and cancellation of the ADSs represented by ordinary shares purchased upon exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place.

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***Other Distributions****.* The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary will have a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives reasonably satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. *This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you*.

**Deposit, Withdrawal and Cancellation**

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***How are ADSs issued?***

The depositary will deliver ADSs if you or your broker deposits ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

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***How can ADS holders withdraw the deposited securities?***

You may surrender your ADSs at the depositary's office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the ordinary shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible.

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***How do ADS holders interchange between certificated ADSs and uncertificated ADSs?***

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

**Voting Rights**

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***How do you vote?***

ADS holders may instruct the depositary how to vote the number of deposited ordinary shares their ADSs represent. *Otherwise, you won't be able to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting sufficiently in advance to withdraw the shares.*

The depositary will notify ADS holders of shareholders' meetings and arrange to deliver our voting materials to them if we ask it to. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary by a date set by the depositary.

The depositary will try, as far as practical, subject to the laws of Israel and of our articles of association or similar documents, to vote or to have its agents vote the ordinary shares or other deposited securities as instructed by ADS holders. The depositary will only vote or attempt to vote as instructed or as described in the following sentence. If we ask the depositary to solicit your instructions at least 30 days before the meeting date but the depositary does not receive voting instructions from you by the specified date, it will consider you to have authorized and directed it to give a discretionary proxy to a person designated by us to vote the number of deposited securities represented by your ADSs. The depositary will give a discretionary proxy in those circumstances to vote on all questions at to be voted upon unless we notify the depositary that:

● we do not wish to receive a discretionary proxy;

● there is substantial shareholder opposition to the particular question; or

● the particular question would have an adverse impact on our shareholders.

We are required to notify the depositary if one of the conditions specified above exists.

We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. *This means that you may not be able to exercise your right to vote and there may be nothing you can do if your ordinary shares are not voted as you requested.*

In order to give you a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited Securities, if we request the Depositary to act, we agree to give the Depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date.

**Fees and Expenses**

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| | | |
|:---|:---|:---|
| ***Persons depositing or withdrawing ordinary shares or ADS holders must pay*:** | ***For*:** | ***For*:** |
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | ● | &nbsp;&nbsp;Issuance of ADSs, including issuances resulting from a distribution of ordinary shares or rights or other property Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates |
| $.05 (or less) per ADS | ● | &nbsp;&nbsp;Any cash distribution to ADS holders |
| A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs | ● | &nbsp;&nbsp;Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders |
| $.05 (or less) per ADS per calendar year | ● | &nbsp;&nbsp;Depositary services |
| Registration or transfer fees | ● | &nbsp;&nbsp;Transfer and registration of ordinary shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw ordinary shares |
| Expenses of the depositary | ● | &nbsp;&nbsp;Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) converting foreign currency to U.S. dollars |
| Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or ordinary shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | ● | &nbsp;&nbsp;As necessary |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | ● | &nbsp;&nbsp;As necessary |

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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the depositary may make payments to us to reimburse and/or share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliates of the depositary and that may earn or share fees or commissions.

**Payment of Taxes**

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs.

**Reclassifications, Recapitalizations and Mergers**

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| | | |
|:---|:---|:---|
| ***If we:*** | ***If we:*** | ***Then:*** |
| ● | Change the nominal or par value of our shares | The cash, ordinary shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities. |
| ● | Reclassify, split up or consolidate any of the deposited securities | The cash, ordinary shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities. |
| ● | Distribute securities on the ordinary shares that are not distributed to you | The depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |
| ● | Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action | The depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |

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**Amendment and Termination**

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***How may the deposit agreement be amended?***

We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. *At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended*.

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***How may the deposit agreement be terminated?***

The depositary will terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders at least 30 days prior to the date fixed in such notice for such termination. The depositary may also terminate the deposit agreement by mailing notice of termination to us and the ADS holders if 60 days have passed from the date on which the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment.

After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property, and deliver ordinary shares and other deposited securities upon cancellation of ADSs. Four months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The depositary's only obligations will be to account for the money and other cash. After termination our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.

**Limitations on Obligations and Liability**

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***Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs***

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

● are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

● are not liable if we are or it are prevented or delayed by law or circumstances beyond our or its control from performing our or its obligations under the deposit agreement;

● are not liable if we or it exercise discretion permitted under the deposit agreement;

● are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

● have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;

● are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and

● may rely upon any documents we believe or it believe in good faith to be genuine and to have been signed or presented by the proper person.

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

**Requirements for Depositary Actions**

Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:

● payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities;

● satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

● compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.

The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

**Your Right to Receive the Ordinary Shares Underlying your ADSs**

ADS holders have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time except:

● when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of ordinary shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our shares;

● when you owe money to pay fees, taxes and similar charges; or

● when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

**Pre-release of ADSs**

The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary may also deliver ordinary shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying ordinary shares are delivered to the depositary. The depositary may receive ADSs instead of ordinary shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer owns the ordinary shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days' notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time if it thinks it is appropriate to do so.

**Direct Registration System**

In the deposit agreement, all parties to the deposit agreement acknowledge that DRS and the Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC under which the depositary may register the ownership of uncertificated ADSs, which ownership will be confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary's reliance on and compliance with instructions received by the depositary through the DRS/Profile System and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

**Shareholder communications; inspection of register of holders of ADSs**

The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

## Exhibit 4.16

**Exhibit 4.16**

**<u>LEASE AGREEMENT</u>**

**Entered into and signed on the 11 day of August 2020 (**the **"Effective Date")**

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| **between:** | **P L.A.R. MANAGEMENT.ASSETS LTD. Co. N. 513653535** |
|  | **By ID** |
|  | of 5 Sakharov St., Rishon LeZion |
|  | :Tel E-mail |
|  | **R. MATRY. ADV-ATTORNEYS COMPANY Co. N. 513343160** |
|  | 37a Ilanot St. Haifa, 34324 |
|  | **E-mail** |
|  | (hereinafter, :jointly and severally the "**Landlord**") **<u>On the one hand</u>** |
| **and between:** | **RECIPHARM ISRAEL LTD. Co. N. 515254944** |
|  | 8 Ya'elim St., Gan Yavne and during the Lease Period at the Leased Premises |
|  | **Tel:** |
|  | **E-mail:** |
|  | (Hereinafter the: "**Tenant**") **<u>On the other hand</u>** |
| **Whereas** | the Landlord declares that it is the owner of the interest in the land known as Block 5405 Plot 14, at 5 Nahal Snir Street, Yavne, in the Northern Industrial Area in Yavne |
| **And whereas** | the Tenant wishes to lease the Leased Premises, as defined below, from the Landlord through an unprotected lease under the Israeli Tenant Protection Law, 1972 (hereinafter: "**Unprotected Lease**"); |
| **And whereas** | the Landlord wishes to lease the Leased Premises to the Tenant through an unprotected lease, throughout the Lease Period, in accordance with the provisions of this Agreement; |
| **And whereas** | the Parties wish to regulate the lease relationship between them; |

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**1.**  **<u>Definitions</u>** 

For purposes of this Agreement, the following terms shall have the meaning set out next to them:

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| &nbsp;&nbsp;**Property** | &nbsp;&nbsp;The land known as block 5405, plot 14, at 5 Nahal Snir Street, Yavne, in the northern industrial area of Yavne. <br>|
| &nbsp;&nbsp;**Leased Premises** | &nbsp;&nbsp;A total area of approximately 660 sqm gross including service areas (a net area of 600 sqm – where net area consists of the floor area), to be built as shell standard {Ramat Ma'atefet} in accordance with **Annex "C"** on the first floor above the mezzanine floor and the ground floor highlighted yellow in the blueprint attached hereto as **Annex A-2 and Annex A-1**. |
|  | &nbsp;&nbsp;Gross Area = net floor area + wall thickness + 10% of the common service areas. |
|  | &nbsp;&nbsp;In addition, 10 parking spaces in the southern part of the courtyard, marked black and numbered 1 to 10 in the blueprint attached hereto as **Annex "A-1"** (hereinafter the: "**Parking Spaces**"). The Landlord has the option to move the parking spaces numbered 1 to 7 and replace other parking spaces in the complex located in the southern part of the courtyard. |
|  | &nbsp;&nbsp;A lobby shared with a third party tenant of the ground floor to be used as an entrance for employees and guests, located at the Northwest Facade highlighted green in the blueprint attached hereto as **Annex "A-1"** all of which, as indicated in the blueprint attached hereto as **<u>Annex A-1 and Annex A-2.</u>** |
|  | &nbsp;&nbsp;It is clarified that the service area does not include operational areas of 30 sqm on the first floor and 10 sqm on floor minus 1 (Hereinafter "**Operational Areas**") which constitute a part of the leased premises and for which reduced rent will be paid as detailed in Section 4.14. |
|  | &nbsp;&nbsp;All the above areas shall be referred to as the **Leased Premises " - "** . |

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| &nbsp;&nbsp;**Building** | &nbsp;&nbsp;The building that is built on the Property, including the additional construction that will be added to it, which now includes a basement, the ground floor, mezinine floor {Komat Beinaim-JS}, and in the future a first floor and a ramp that will be added. |
| &nbsp;&nbsp;**Transfer of Possession Date** | &nbsp;&nbsp;The date determined in Section 8 of this Agreement. |
| &nbsp;&nbsp;**CPI Linkage** | &nbsp;&nbsp;The Rent shall be linked to the CPI on an annual basis so that if the last index published at the time of the review (hereinafter the: **"New Index")** is higher than the Base Index, then the rent for the period after the review date will be increased by the rate at which the New Index has increased compared to the Base Index. In the event that the New Index is lower than the previous index according to which the most recent rent was paid, then the Rent will be paid according to the above previous index (the higher index). The Rent will be updated on October 1 of each lease year by the rate of increase in the index known at that date, for the next 12 months starting January lst. |
| &nbsp;&nbsp;**Index /CPI** | &nbsp;&nbsp;The CPI, known as the Consumer Price Index published from time to time by the Central Bureau of Statistics and Economic Research, including the same index even if published by another government institution, and including any other official index that replaces it, whether or not such index is based on the data on which the existing index is based. Should another index replace said index, the index shall be adjusted at the ratio determined by the Central Bureau of Statistics between the new index and the replaced index. |
| &nbsp;&nbsp;**Base Index** | &nbsp;&nbsp;The December 2019 index. |
| &nbsp;&nbsp;**Compulsory Payments** | &nbsp;&nbsp;Any tax, fee, surcharge and other payments of any kind that are payable under any law to the State and/or local authorities. |

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| &nbsp;&nbsp;**Rent** | &nbsp;&nbsp;As defined in Section7.1 of this Agreement. |
| &nbsp;&nbsp;**Lease Period** | &nbsp;&nbsp;A period of 120 months which shall commence on the Transfer of Possession Date as specified in Section 6 of the Agreement, with an exit date after five years in accordance with the conditions stipulated in Section 6.6 below. |
| &nbsp;&nbsp;**Purpose of Lease** | &nbsp;&nbsp;In accordance with the permitted uses of the Property according to the valid plans and building permits as of the date of signing of this Agreement. The Tenant will only operate the Leased Premises as a workshop and warehouse (including as a laboratory for the development of pharmaceuticals). |

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<u>**List of Annexes**</u>

The following documents are attached to this Agreement as an integral part thereof:

<u>**Annex A**</u> - Property Blueprint.

<u>**Annex B**</u> - Illustrative Amortization Schedule for Payment of the Completion Works

<u>**Annex C**</u> - Agreements regarding the Leased Premises

<u>**Annex D**</u> - Account debit authorization (bank direct debit)

<u>**Annex**</u> **<u>E</u>** - Management Agreement

<u>**Annex F**</u> - The Charges

<u>**Annex G**</u> - Hebrew Translation of the Agreement

<u>**Annex H**</u> - Allocation of Responsibility for obtaining Regulatory Approvals in public areas

**2.** <u>**Preamble, Appendices, Headings**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. The preamble and appendices to this Agreement form an integral part hereof and are to be construed as such.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2. The headings of this Agreement are for convenience only. They are not part of the provisions of the Agreement
and do not affect the interpretation of this Agreement or any part hereof.

**3.** <u>**The Landlord's Warranties**</u> 

The Landlord warrants and affirms as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1. The Landlord is the owner of the interest in the Property, as defined above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2. Its rights to the Property and Leased Premises are free of any debt (except a mortgage), foreclosure, or any third-party rights whatsoever.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3. There is no impediment and/or restriction on leasing the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4. The Landlord has not entered into a parallel or conflicting agreement
with any third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5. A copy of a fire department permit that was previously granted for the Building is attached as <u>**Schedule3.5**</u> hereto.

**4.** <u>**The Tenant's Warranties**</u> 

The Tenant represents, certifies and warrants as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1. That it has the financial capability andfinancial stability that enables it to fulfill its financial obligations to the Landlord
pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2. That the Tenant has visited the Property, the existing Building and has been given the opportunity to
see and examine them, including their physical condition at present, their legal and planning status and the blueprint attached as <u>**Annex A**</u> to this Agreement, and the Tenant has had the opportunity to obtain any information that the
Tenant considers relevant to the Leased Premises, and has found all of the above satisfactory and in all respects fits its purposes and
requirements, and the Tenant waives any allegation of nonconformity with respect to any of the matters referred to in this section. [
An extract from the Land Registry Office, the building permit for the existing Building and a fire department permit will be attached
hereto upon receipt of possession].

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3. The Tenant represents and undertakes to take care of all the
fire protection requirements in accordance with the Israeli standard and the fire department requirements arising from the Completion
Works in the Leased Premises to be carried out at the Tenant's request, and the cost thereof shall be at the Tenant's expense. The Landlord
is responsible for obtaining the fire department's permit which includes a standard sprinkler system for the Leased Premises in its "shell
condition" (exterior facade) and all expenses for the protection means required for standard offices in shell space condition will
be at the Landlord's expense. The Tenant is responsible for the fire department's permit required for a business license and shall pay
the additional costs, if any,, that are related to its activities beyond the said standard.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4. The
Tenant warrants and undertakes to comply with all requirements of all competent authorities in connection with its uses of the Leased
Premises, at its own expense, in accordance with the law and the requirements of the competent authorities such as: the Ministry of the
Environment, the Ministry of Health, the Municipality of Yavne, the Ministry of Economy, the Fire Department, etc., throughout the Lease
Period. The Landlord will ensure the approvals required to obtain a Form 4 ("Tofes Arba") to occupy the Leased Premises are
obtained, and the Tenant will ensure that these approvals are obtained as required for a business license.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5. The Tenant is aware that the Building includes other facilities that will also serve the Leased Premises:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.1. A vendor entrance lobby in the eastern facade highlighted orange in the blueprint attached hereto as **Annex A-1** that includes a staircase to the first floor and upper floors and that in the future will include a stairwell and an elevator
to the first floor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.2. A passenger elevator in the lobby area highlighted blue in the plan Annex A-1 capable of carrying
 approximately 700 kilos of weight, to be installed and operational within 6 months of the signing of this Agreement. It is agreed
 that the installation of the elevator constitutes a suspensory condition for the transfer of possession of the Leased Premises to
 the Tenant, and that the rent will not be paid prior to the date of operation of the elevator and of obtaining an operating permit
 from the elevator company.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.3. A ground floor lobby, shared by the Tenant and a third party, for staff and guest entrance in the northwest
facade highlighted pink in the blueprint attached hereto as **Annex A-1 and Annex A-2.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6. That it is aware that it leases the Leased Premises in a shell condition (Ramat Ma'atefet) in accordance
with the provisions of this Agreement, where it is agreed that the construction additions will be made to it pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7. It is hereby clarified that the remaining areas and courtyards bordering and adjacent to the Leased
 Premises do not form part of the leased Premises, without derogating from the gardens being common property and the walkways at the
 entrances to the Leased Premises, all in accordance with the blueprint attached hereto as **Annex A,** and without further
 derogating from the area designated for a service elevator in part of minus 1 floor up to the first floor on the eastern facade of
 the Building marked pink in the blueprint attached hereto as **Annex A.** 

It is further agreed that the Tenant shall have the right to connect to the existing generator on floor minus 1 as a connection solely for times of emergency, provided that the generator has the capacity for such connection in the framework of the existing Building and the building expected to be built, that permission has been granted by the fire department and any other applicable authority and without any Landlord liability for damage that may be caused to the Tenant, or anyone on its behalf as a result of such use.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8. The Tenant represents, certifies and warrants that it will not interfere with any third party conducting
its business and/or activities in the adjacent areas. Furthermore, the Tenant undertakes not to object and/or prevent and/or thwart in
any manner whatsoever, either directly or indirectly, the lease to third parties of parts of the Building that are not part of the Leased
Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9. The Tenant is aware that it is prohibited from using and/or passing through and/or parking and/or storing
equipment in any of the Property premises, except for the parking spaces and garbage bins marked in the blueprint. (14 parking spaces
only), the service elevator, including its location, as specified in **Annex "A".** 

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10. The Tenant is aware that the Landlord has unused building rights
in the Property and future plans to use them in areas of the Property, and the Landlord will be entitled to utilize and exploit them,
provided that this does not adversely affect the Tenant's reasonable use of the Leased Premises and no other additions are built above
the Leased Premises without the Tenant's prior written consent..

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11. The
Tenant is aware that the Landlord is planning to build an additional floor or floors on top of the remaining ground floor area which is
not the Leased Premises, with the access to the roof area being via a ramp to be built in the west and south yards of the Property. Upon
completion of the ramp construction work, the Landlord will plant trees along the length of the planter located in the facade from the
beginning of the pedestrian entrance to the vendors' entrance to the stairwell. It is agreed that in the event that during its construction,
this ramp creates an impediment to the reasonable use of parking spaces and/or vendors' entrance, the Landlord shall arrange for a solution
to these matters and/or alternative parking for the duration of the construction period. It is also clarified that the construction of
additional floors will not prevent the Tenant from making reasonable use of the Leased Premises and the additional floors shall be built
in a way that does not prevent the Tenant from using the fume ventilators required by the Tenant for the Leased Premises. To the extent
that the construction of an additional floor imposes additional costs on the Tenant, the Landlord will pay these costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12. The Tenant is aware that the Landlord is planning to build another lobby (with the same contours) on the
new first floor on the Property's northwest facade, similar to the bottom floors' lobby, to serve the additional floor on the roof area.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13. The Tenant is aware that the Landlord is planning to install solar power systems on the entire roof area
to be available after completion of the future construction of the additional floor. The Landlord will allow the Tenant to make arrangements
on the roof above the Leased Premises for the fume ventilators ("Mindafim") and a solar hot water system (solar water heater)
as required by the Tenant, all at the Tenant's expense and in accordance with applicable law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14. Further, it is agreed that the Landlord will leasethe Operational Areas to theTenant, for a rent equal to 50% of the regular Rent.

**With respect to the works listed above, the Tenant declares that it consents thereto, waives any claim with regard thereto and will refrain from taking any actions that may interfere or thwart such works. It is agreed that the works will be carried out in a manner that does not interfere with the Tenant's reasonable use of the Leased Premises.**

**5.** <u>**Construction Work in the Leased Premises**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1. Since the Landlord owns the interest in the Property and the Building, including
the works to be done in the Building, the Landlord's prior written approval and consent will be required for works relating to obtaining
a building permit, or plumbing and construction works, as well as any alteration and/or work and/or renovation of the Leased Premises,
if the Tenant decides to perform such works (hereinafter: **"Completion Works").** The
foregoing does not impose on the Landlord any liability of any kind and nature in connection with the planning and execution of the Completion
Works, their quality and schedule for execution and any liability in this regard shall apply to the Tenant at its sole expense. Construction
plans for the Completion Works will be submitted for the Landlord's approval in advance, and the consent of the Landlord will not be refused,
except on reasonable grounds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2. Should the Tenant decide to do any of the Completion Works on its own or
through another contractor on the Tenant's behalf (hereinafter: **"External Contractor"),** the
Landlord will not participate in the costs of the Completion Works in the Leased Premises, and all costs and/or expenses in respect thereof
will be covered solely by the Tenant. The foregoing shall not apply to Completion Works agreed to be executed by the Landlord as set out
in Section 5.4 below. Should theTenant choose to carry out the works through a contractor on its behalf, the following provisions shall
apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.1. The Tenant must obtain the Landlord's prior written consent to the
identity of the External Contractor (which will not be withheld except on reasonable grounds);

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.2. The External Contractor shall be a licensed contractor and shall have the necessary classifications to carry out such completion works
as desired by the Tenant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.3. The External Contractor shall have all insurance coverage required to carry out the Completion Works in the Leased Premises;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.4. The External Contractor shall act in accordance with Section5.3
without causing damage or interference with the reasonable use by other tenants in the Building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.5. The Landlord shall have no responsibility for the Completion Works carried out by the Tenant or by an External Contractor on its behalf.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3. Insofar as the Landlord is not the one who carries out the Completion
Works, the Tenant must obtain the Landlord's consent to the Completion Works that the Tenant wishes to perform, and perform them on its
own, and under its full responsibility (including responsibility in connection with the Completion Works, the licenses and permits required
by law, the work and the materials), and perform them without derogating from the reasonable use of Building by the other tenants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4. The Tenant undertakes to submit detailed plans, including technical
specifications, to the Landlord, within 30 working days of the signing of this Agreement for the purpose of making internal divisions
and completion works to the Leased Premises, the lobbies, the stairwells (hereinafter: **"Completion Works** "). The Landlord shall return to the Tenant a quotation to carry out the works in accordance with the plans set
out above within 15 days of receipt thereof. The Tenant' s architect shall approve the identity of theoperating contractor .If the Tenant
approves the bid within 15 days of sending the quotation to the Tenant with a work schedule attached thereto, the following provisions
apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.1. The
Landlord will perform the works on its own or through a third party on its behalf and
at its own expense;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.2. The Landlord will not be responsible for the planning of the internal partition or the planning of the
Completion Works;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.3. The Landlord will assign to the Tenant the operating contractor's warranty required by law and the contractual
rights vis-a-vis the operating contractor regarding the warranty. The warranty shall be for the materials and the works relating to the
Completion Works. The Landlord shall assist the Tenant in coordinating matters with the operating contractor and in legal proceedings
against the operating contractor, if any.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.4. A tri-party agreement shall be signed between the Landlord, the Tenant and the operating contractor, in
a form to be prepared and attached to this Agreement within 21 days from the date the Tenant
submits the technical specifications to the Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4.5. Within 15 days of the final plans of the Completion Works
are approved (including all the refurbishing) by both Parties, a plan shall be sketched and responsibility for obtaining regulatory permits
and responsibilities for the Leased Premises and the Building shall be agreed according to the principals set forth in this agreement
in general and specifically in sec 4 above (including regulatory permits for public areas and installations that are not part of the
Leased Premises), signed by the Parties and attached as **Annex "H"** hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5. If the Tenant approves the above quotation for the Completion
Works in the Leased Premises, excluding the works detailed in **Annex "C"** attached hereto, the Tenant will pay the Landlord
additional annual rent equal to the cost of the Completions Works actually borne by the Landlord, before VAT according to the Landlord's
books, (hereinafter: **"Completion Work Costs")** divided by 10, plus annual interest of 12%, plus VAT, of the unpaid balance
of the Completion Work Costs (hereinafter the: **"Annual Addition to the Rent").** The Annual Addition to the Rent will
be paid in equal monthly payments plus statutory VAT and Linkage Differentials for a period of ten years and shall be considered for
all intents and purposes as an integral part of the Rent.

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To illustrate the calculation, a sample payment table is attached hereto as **Annex "B".**

For the avoidance of doubt, the 2% increase referred to in Section 7.4 below shall <u>not</u> apply to the Annual Addition to the Rent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6. If for any reason the Tenant does not lease the Leased Premises for a period of 10 years, or if the Lease
Period ends before ten years have passed and before the full Completion Work Costs are paid by means of paying the Annual Addition to
the Rent over a ten year period, the Tenant will pay the unpaid balance of the Completion Work Costs plus statutory VAT and Linkage Differentials
in one final payment due at the end of the Lease Period.

**<u>For example:</u>** should the Tenant leave the Leased Premises after 7 years, the balance that the Tenant will be required to pay will be NIS 383,333 plus VAT, as detailed in **Annex "B".**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7. The Completion Works will be carried out concurrently with the
construction of the Leased Premises, as far as reasonably possible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8. If the Tenant notifies
 the Landlord that it wishes the Landlord to build a gallery of about 200 sqm above the first
 floor of the Leased Premises, (adjacent to the windows' area, in a position agreed
 by the Parties at the time of the signing of this Agreement and which will be marked on the
 blueprint as **Annex "A-4"**), then the Landlord will do its best effort to
 build the Tenant such a gallery for use in accordance with the Purpose of the rental (provided
 only that the Landlord is able to obtain the necessary approvals in accordance with the law
 from the authorities). In the event of a notice from the Tenant that it wishes to rent such
 a gallery in the future, then the Landlord shall at its own expense build the gallery as
 shell space in accordance with the specifications in **Annex C** and shall be leased to
 the Tenant at the rent stated in this Agreement, as adjusted from time to time, with a 20%
 discount. In the event that the Tenant wishes the Landlord to perform the completion works
 of the gallery, such completion works will be carried out at the Tenant's expense and
 be financed by the Landlord in accordance with financing terms and conditions detailed in
 the Agreement with regard to the Completion Works.

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In order to enable the foregoing, the Landlord shall execute, already at the current construction stage, a roof for the first floor that is capable of holding the optional future gallery and which can hold 300 kg per square meter.

**6.** <u>**Lease Period and Options**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1. The lease period is for 120 months, beginning on the Transfer of Possession
Date (hereinafter the **"Lease Period"):** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2. Subject to full compliance with all of the Tenant's obligations in accordance with the
 provisions of this Agreement, the Tenant shall have the right to extend the lease for two option periods: a first option of 60
 months (hereinafter the: "First Option"); and a second option of 60 months (hereinafter: the "Second
 Option").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3. Each one of the options will automatically enter into effect, unless the Tenant has notified in
 writing of its non-exercise at least 3 months prior to the end of the Lease Period. Without prejudice to the generality of the
 foregoing, in the event that the Tenant breaches the provisions of this Agreement and does not cure the breach within 30 days
 of receipt of a written notice thereof from the Landlord, the Landlord shall have the right to notify the Tenant in writing of the
 absence of its right to exercise the Option, with 9 months advance written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4. The Tenant undertakes to pay the Landlord the Rent and to pay the Landlord and the authorities all
 the payments that apply to the Tenant as the holder of the Leased Premises, for the entire Lease Period, whether or not Tenant uses
 the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5. It is agreed that the Tenant may bring in a sub-tenant, provided that: (1) the sub-Tenant is without
 a criminal record; (2) the Tenant will continue to be bound by all provisions and obligations set forth in this Agreement with
 respect to all parts of the Leased Premises (both the portion used by the Tenant and the sub-leased portion). However, it is
 clarified that in the case of a sub-tenant or alternative tenant that leases 50% or more of the Leased Premises, the Tenant and/or
 anyone on the Tenant's behalf, shall not have an option to extend the lease beyond the first ten years of the lease and the
 extension of the lease agreement shall be subject to the Landlord's prior written consent, provided that the Tenant has the right to
 decide that the alternative tenant lease period shall not be less than 5 years (but in any case not more than 20 years in total).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6. The Tenant shall have a point of exit from the Lease Agreement
at the end of five years from the start of the Lease Period and thereafter, on fulfillment of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.1. The Tenant will give a six-month prior written notice of its intent to terminate the Lease Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.2. The Tenant will pay the Landlord the balance of the Completion Work Costs plus statutory VAT and Linkage
Differentials as set out in Section 5.6 above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6.3. The Tenant will in addition pay the Landlord compensation in an amount equal to 10% of the balance of
the Rent due by the end of the original Lease Period of ten years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7. If the Tenant is interested in leasing additional space in the
 Building, the Tenant may provide written notice to the Landlord and in this case, when additional space for renting becomes
 available (if it becomes available), the Tenant shall have priority to lease such space in accordance with the terms of this
 Agreement. In this context, it is agreed that if space becomes available, the Landlord shall so notify the Tenant in writing and the
 Tenant shall notify the Landlord in writing within 14 days from the date it receives such notice, if it exercises this right and
 shall in this period sign an addition to this Agreement regulating such lease in accordance with the terms of this Agreement, *mutatis mutandis.* 

**7.** <u>**Payment of Rent**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1. In consideration for leasing the Leased
Premises which are the subject of this Agreement, the Tenant undertakes to pay the Landlord rent for the Lease Period, as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.1. During the Lease Period the rent for the first floor of the Leased Premises (a gross area of
 approximately 660 square meters) will be NIS 50 per gross square meter, i.e., a total of NIS 33,000 per month, plus NIS 25 per
 square meter of the Operational Areas, plus statutory VAT. In addition, the monthly payment for the Annual Addition to the Rent
 will be paid in accordance with Section 5.5 above.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.2. Measurement will be performed by a surveyor agreed upon by both parties (and in the absence of agreement
within 7 days of either party's request, such surveyor will be appointed at the request of either party by the President of the Association
of Licensed Surveyors in Israel) and both Rent and Management Fees will be updated accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.3. During the Lease Period, the rent for parking spaces in excess
of ten parking spaces will be NIS 250 per parking space per month, plus statutory VAT and CPI linkage differentials.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1.4. During the Lease Period, the insurance premium (for the Landlord's
insurance policies described hereafter which cover also the Leased Premises) will be NIS 2 per square meter per month, plus statutory
VAT and CPI linkage differentials . The insurance maintained by the Landlord shall include property insurance, third party insurance
(with a right of subrogation to the Tenant), fire, plumbing damage insurance, natural disasters insurance and earthquake damage insurance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2. The Rent will be paid on a monthly basis (between the first to the tenth day of each month) for the entire
Lease Period by means of a standing bank order in the form attached hereto as **Annex "D".** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3. In addition to the Rent, the Tenant will pay the Landlord CPI linkage differentials on the rent. As of
the second year of the Lease Period, CPI linkage differentials, as defined above, will be added to the Rent. At the end of each year of
the lease, the parties will calculate the Index increase , and this supplement will be paid as of that date and thereafter (but not for
the period elapsed until the date of the calculation).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4. In addition to linking the Rent to
Index increase, the Rent will increase by an additional 2% per year (12 months) of the most recent rent.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5. To the extent that the Option is exercised, the Tenant shall deliver to the Landlord astanding bank
order in the form attached hereto as **Annex "D",** *mutatis mutandis,* for the
rent during the Option period as well as an extension of the collateral for the Option period, at least 90 days prior to
the commencement of the Option period. Failure to deliver the standing bank order and the collateral on such date will lead to the expiration
of the Option and termination of the Lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6. During the Lease Period, the Tenant shall pay, in addition to the Rent, a monthly management fee of
 NIS 10 per square meter linked to the additions in accordance with the Rent payments per gross square meter, for the ongoing
 maintenance of the equipment, the Leased Premises and public areas (the **"Management Fee").** In this context, it is
 agreed that the provisions of the Management Agreement attached hereto as **Annex "E"** constitute an integral part
 of this Agreement, and a breach of the provisions of the Management Agreement shall constitute a breach of the provisions of this
 Agreement.

Management Fees include the maintenance of all public fire protection systems, maintenance and cleaning of public areas (including stairwells) gardening and maintenance of the passenger elevator (excluding the service elevator for raw materials).

**8.** <u>**Construction of the Leased Premises and Transfer of Possession of theLeased Premises**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1. The Leased Premises will be constructed in accordance with Annex C.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2. The Landlord undertakes to complete the construction of the
Leased Premises and transfer posession of the Leased Premises, in a shell condition within six months of the Effective Date. If the Landlord
completes the construction of the Leased Premises at an earlier date, the Tenant undertakes to accept the Leased Premises on the construction
completion date and pay the Rent as of the Transfer of Possession Date, provided it has been given written notice as stated in Section
8.6.3 below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3. It is agreed that the Landlord will be entitled to notify the
Tenant that the Transfer of Possession Date has been postponed by additional 60 days, by giving 60-day advance written notice to the
Tenant.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4. If the Landlord is late in delivering the possession of the Leased Premises beyond a grace period of 60
days, then the Landlord will pay the Tenant a fine of 150% of the Rent for the period of the delay.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5. In the event that the Landlord is unable to complete the works by the date stated above due to the
 Coronavirus crisis, including due to a shortage of workers and/or materials and/or orders and/or emergency regulations and/or
 instances in which the authorities do not work and/or due to other Force Majeure events, then the Transfer of Possession Date will
 be extended by the period of such impediment and/or delay, and in any event the Tenant shall be given notice in accordance with
 Section 8.6.3 below. The Landlord shall provide written notice to the Tenant of the impediment under this Section. In the event that
 the Landlord is required to defer the Transfer of Possession Date due to any of the foregoing to more than 14 months from the
 Effective date, then either Party may terminate this Agreement without any penalty or payment, by way of giving written notice to
 the other Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6. The Landlord will transfer the possession of the Leased Premises as defined above and the Tenant shall
take possession thereof upon fulfillment of the following cumulative conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.1. The Leased Premises will be delivered to the Tenant in shell condition in accordance with the provisions of **Annex C;** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.2. The elevator shall be functioning and in operation as stated in Section 4.5.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6.3. Notice will be provided to the Tenant 40 days in advance of
the fulfillment of the conditions set out in Sections 8.6.1 and 8.6.2 above, provided such date occurs 6 months after the Effective Date.

(hereinafter – **"Transfer of Possession Date")**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7. As of the Transfer of Posession Date the Tenant shall bear all
payments and charges arising from its status as holder of the
Leased Premises and all that entails, including the Management Fees specified in Section 7.6 above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8. On the Transfer of Possession Date for the Leased Premises,
or any part thereof, the Parties shall prepare a transfer protocol. Receipt of possession by the Tenant will constitute confirmation and evidence that the Tenant has received the Leased Premises to its satisfaction, except with regard to the matters set
out in the transfer protocol and hidden defects.

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**9.** <u>**Use of the Leased Premises**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1. The Tenant undertakes to maintain the Leased Premises, including equipment and/or installations with which
the Leased Premises are equipped, and including equipment and/or installations that serve the Leased Premises and are located inside and
outside the Leased Premises, in good and proper condition during the entire Lease Period and/or Option period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2. The Tenant undertakes to avoid causing any damage or spoilage to the Leased
Premises, or any part thereof, or any of its systems and installations (hereinafter: **"Damages")** and
to repair, at the Tenant's expense, in the shortest possible time, all Damages incurred during the Lease Period (including the special
damages set forth below), including any Damages caused by it and/or on its behalf and/or by visitors, customers, employees, workers and/or
any other person on its behalf, except for reasonable wear and tear.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3. The Tenant declares that if it does not keep the Leased Premises
in such condition, level and quality as stated in this Agreement and/or it does not repair the Damages, and whatever requires repair
and improvement and/or does return the Leased Premises in accordance with its obligation as stated in Section 9.1 above, then at the
end of the Lease Period, the Landlord may, but is not required to, make any repair and take any action that the Landlord deems appropriate
for the purpose of repairing the Damages and/or restoring the Leased Premises to such appropriate level and quality and/or to restore
the situation to its former condition (excluding reasonable wear and tear), at the expense of the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4. The Landlord may enter the Leased Premises for the purpose of exercising its rights as stated in this
Section, after sending a 24-hour advance written notice to the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5. The
Tenant undertakes to adhere to and comply with any law relating to the possession and use of the Leased Premises. The Tenant undertakes
not to do in the Leased Premises, or in any part of thereof, or in connection therewith, anything that could be an impediment, or nuisance,
or cause damage, or inconvenience, to the Landlord and/or any third party.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6. The Tenant undertakes to ensure that the Leased Premises and their immediate surroundings are clean, and
to conduct its business exclusively within the confines of the Leased Premises. The Tenant shall pay all fines imposed by municipal and/or
government authorities, if any, for breach of the provisions of this Section. Should any fines be imposed on the Landlord due to the Tenant's
acts or omissions, the Tenant shall reimburse the Landlord for the full amount of such fines, provided that the Landlord gave written
notice of such fines to the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7. Rights in respect of erecting signs on the Property and/or the Building shall be the sole property
 of the Landlord; without derogating from the foregoing, the Tenant may be permitted to place signs on the Leased Premises, provided
 such signs are made in accordance with applicable law as well as all the licenses required by law to place such signs. The Tenant
 shall bear all fees and taxes for placing such signs.

**10.** <u>**Licensing and Permits**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1. The Tenant declares that it is familiar with the conditions required for obtaining any license and/or
permit and/or approval for the purpose of operating its business in the Leased Premises and its work therein, and that prior to the signing
of this Agreement, the Tenant actually checked the suitability of the Leased Premises for its purposes and the purpose of the lease and
the possibility of obtaining all necessary licenses, permits and approvals to operate the Leased Premises according to the purpose of
the lease, and found all of them suitable for the purpose of the lease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2. The Tenant undertakes to obtain from any municipal and/or local and/or governmental and/or other authority,
all licenses and/or permits required by law to operate and/or conduct its business in the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3. The Tenant declares that it is aware that the Landlord is not
responsible towards the Tenant for obtaining any such license and/or permit. If, for any reason, the Tenant fails to obtain a license
to conduct its business, such failure will not exempt the Tenant from paying the Rent and fulfilling all of its obligations under this
Agreement, except if building violations have occurred in the Leased Premises prior to the transfer of possession, or failure by the
Landlord to provide required permits regarding building the Leased Premises. It is made clear that the Landlord is not aware of the any violations
in the construction of the Leased Premises and shall not make such violations in the Leased Premises during the construction of the Leased
Premises or prior to the transfer of possession thereof.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4. The Tenant undertakes, for the entire duration of the Lease Period, to renew any license and/or permit
required for its use of the Leased Premises, so that during the entire Lease Period and any part thereof, the work in the Leased Premises
and its operation are conducted as required by law and in accordance with the terms of any license, permit, order, regulation or decree
issued from time to time by any competent authority whatsoever with regard to the business conducted in the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5. If a competent authority has conditioned the granting of a license
or permit that is necessary to operate the Tenant's business and requires changes to the Leased Premises, the Tenant undertakes not to
make such changes until after receiving the Landlord's prior written consent. The Landlord shall not withhold such consent, provided
that the changes are made by the Tenant in accordance with applicable laws and at the Tenants expense.

**11.** <u>**Implementation of Works in the Leased Premises**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1. The Tenant undertakes not to make any changes to the Leased Premises, nor add any extra additions,
 or demolish or alter any part of the Leased Premises and/or any of its installations, or allow or permit any repair and/or
 alteration and/or addition and/or renovation and/or demolition, without the prior written consent of the Landlord. The Landlord will
 not refuse such Tenant's request, except on reasonable grounds. Provided that a written notice is given to the Tenant, the
 Landlord shall be entitled to prevent any act in violation of this Section and shall destroy and remove any alteration, addition,
 renovation or amendment made in contravention of this Section, all at the expense of the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2. in any case where the Landlord
allows the Tenant to make changes and/or repairs and/or renovations and/or additions and/or demolitions, as set forth in this Section,
the obligation to pay and the liability for these actions shall rest solely with the Tenant, and all the provisions of this Agreement
regarding changes to the Leased Premises shall apply to such actions.

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All repairs and/or modifications and/or additions and/or renovations and/ or improvements made by the Tenant to the Leased Premises, either with or without the Landlord's consent, and all fixtures to the Leased Premises, including the air conditioning system and any infrastructure in the Building (all of which will be referred to hereinafter as: **"Changes")** will become, at the end of the Lease Period, including due to any the change of tenant, the property of the Landlord and be transferred to its possession, and the Tenant waives any claim and/or demand in relation thereto, unless otherwise agreed in writing between the Tenant and the Landlord. For the avoidance of doubt, it is hereby clarified that the Tenant will not be entitled to any payment for the Changes.

**12.** <u>**Taxes and Payments**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1. The Tenant undertakes to pay all taxes and expenses that apply to the holder of Leased Premises
 throughout the Lease Period as set out below, whether they exist as of the date of this Agreement or will exist in the future, for
 the Lease Period and/or the Option, and to pay the relevant amounts, whether or not the payment call is sent to the Landlord in a
 timely manner, on the due date set for payment, and in the absence of such date, immediately upon receipt of the Landlord's
 demand; however, the Tenant will not be liable for any payment due to the Landlord's deliberate delay in delivering the
 payment call to the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.1. Business taxes, municipal taxes, including property taxes, levies and/or surcharges, governmental and
any other tax arising from the possession of the Leased Premises and/or its lease by the Tenant and/or use thereof, as well as any tax
that applies to the period of possession of the property, including new taxes customarily applied to the Tenant of the property, rather
than to the Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.2. It is agreed tha tproperty taxes will be paid for the leased areas according to Gross Area (net
 floor area + wall thickness + 10% common service areas) and 10 parking spaces of 400 sqm total.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.3. Any other payment arising from the maintenance and operation of the Leased Premises, other than those
included in the Management Fee and except for capital investment into the property including for the supply
of water, electricity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.4. All insurance payments, as specified in Section 7.1.4 above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.5. The Tenant undertakes to transfer, within 14 days of transfer of the possession, electricity and water
bills issued by the Municipality of Yavne to its name, and pay such bills throughout the Lease Period (including any Option period, if
exercised).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.6. The Tenant undertakes to present to
the Landlord, from time to time, at the Landlord's request, all receipts and/or certificates attesting to the fact that all payments applicable
to it pursuant to this Agreement have been actually paid, and on time, by the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.7. Electricity
and water expenses will be billed using separate sub- meters to be installed in the Leased Premises .for the purpose of such paymentThe
Tenant will provide the Landlord with an authorization to charge valid bills (a standing order to debit a bank account), according to
the attached <u>**Annex D.**</u> 

**13.** <u>**Delay in Payments**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1. Should the Tenant be late in payment of any amount due by it to the Landlord and/or another party in
 accordance with this Agreement and does not cure the delay within five business days from receipt of written notice from the
 Landlord, the Tenant will pay the Landlord, as applicable, in addition to index differentials, arrears interest on the late
 payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2. Said interest will be calculated for the period from thelatepayment due date until the actual payment
thereof by the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3. If the amount in arrears is an amount paid to a third party
by the Landlord in lieu of the Tenant, the above interest rate will be calculated for the period from the date the Landlord paid the
amount in arrears to the third party until repayment by the Tenant. If the Landlord has paid any third party interest and/or a penalty
for the late payment made by the Tenant, the interest and/or the penalty will be considered as part of the debt principal which the Tenant must repay to the Landlord, as applicable.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.4. No interest payment under this Section shall prejudice the Landlord's right to any other remedy provided
for in this Agreement and/or by law, including, and without prejudice to the generality of the foregoing, eviction of the Tenant as well
as any other remedy resulting from the breach of the Agreement due to the failure to pay on time. Receipt of such interest shall not be
construed as a waiver by the Landlord of any other remedy and/or in derogation of any right whatsoever conferred on the Landlord by the
Agreement and/or by any law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.5. A delay in any payment due from the Tenant to the Landlord pursuant to this Agreement that has not
 been cured by the Tenant within 7 days of receiving a written reminder from the Landlord, shall be deemed to constitute a
 fundamental breach of this Agreement that confers on the Landlord all remedies granted to it under this Agreement and any law
 relating to a fundamental breach of this Agreement.

**14.** <u>**Prohibition on the Transfer of Rights by the Tenant and Prohibition of Registration thereof**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1. The Tenant hereby undertakes not to assign, transfer, hand over, sell, lease or place a lien on its
 rights pursuant to this Agreement, in whole or in part, in any way or manner, and not to assign, transfer, hand-over, or rent or
 lease the Leased Premises, in whole or in part, other than in accordance with that stated in the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2. Without prejudice to the generality of the foregoing, the Tenant may sub-lease the Leased Premises through
a sub-lease and/or to a substitute tenant for purposes permitted pursuant to the City Building Plan and the Building Permit that apply
to the Property, provided that the Landlord has approved the sub-tenant/substitute tenant in writing and in advance, which approval will
be given provided the sub-tenant/substitute tenant does not have a criminal record and will have proven financial ability to the sole
satisfaction of the Landlord. It is clarified that such sub-letting will not derogate from the Tenant's full responsibility for its obligations
under this Agreement with respect to the entire area of the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.3. Subject to the foregoing, the Tenant hereby undertakes not to share another or others in the lease
 and/or possession and/or the operation of the Leased Premises, nor grant any person or legal body possession and/or right of use of
 the Leased Premises or any portion thereof, whether as an invitee, for consideration or not, or in any bther way.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.4. The Tenant hereby undertakes not to register its rights under this Agreement or in connection
 therewith in the Land Registry Office or the Land Authority or in any other manner, nor register a cautionary note in connection
 with the said rights.

**15.** <u>**Insurance**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1. The Landlord will insure the Leased Premises with comprehensive insurance as well as fire, third party,
plumbing and BIT insurance (and to remove all doubt – not including contents, or the Tenant's employees). The insurance premiums will
be in accordance with the assessment made by a surveyor on behalf of the insurance company, of an Israeli insurance company, and the Tenant
will reimburse the Landlord for the insurance premiums. The Tenant will also pay the deductible cost for any damages caused by the Tenant
and/or any person on the Tenant's behalf.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2. In addition, the Tenant will insure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.1. The Tenant's contents in the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.2. The works carried out in the Leased Premises by the Tenant and/or on its behalf, with a Contractor
 All Risk Insurance (including third party) and employers' liability insurance policy. The policyholder's name will
 include contractors, subcontractors and the Landlord. The insurance will explicitly include coverage for damage caused to adjacent
 property and the property in which the works are performed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.3. Its legal liability in respect of its activities in the Leased Premises as to be covered by
 third-party liability insurance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.4. Liability to employees for bodily injury caused in the Leased Premises while, during and as a result of the works.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.5. The Tenant hereby undertakes to add the Landlord's name as an additional insured entity in the
 aforementioned policies, with each third party insurance being subject to a "cross-liability" clause whereby the
 insurance shall be deemed to be a separate policy for each insured entity. In addition, the Tenant undertakes to allow to pledge the
 policy to the mortgage bank on behalf of the Landlord. Prior to the transfer of possession of the Leased Premises to the Tenant, the
 Tenant will show the Landlord all of the insurance policies issued in accordance with the obligations set out in this Agreement, as
 a condition to receiving possession of the Leased Premises, and the Tenant shall, on a regular basis, show to the Landlord every new
 policy that is issued to the Tenant, or any amendment to a policy previously shown to the Landlord, and on the Landlord's
 request the Tenant shall add and/or amend the insurance policies to the satisfaction of the Landlord.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.6. The Tenant will make sure that the insurance policies will have an express clause under which the
 insurer expressly waives any right of subrogation to return to the Landlord with a claim for subrogation or reimbursement or
 indemnification for direct or indirect damage which is caused due to the Landlord, if such damage is caused, subject to a
 corresponding clause in their insurances. This clause shall not apply to a person who maliciously caused damage. The Tenant
 undertakes to provide the Landlord with an insurance policy with a clause containing cancellation of subrogation rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.7. The Landlord's right of review and
the use, or waiver of use of its right to review the policies and to require updating, supplementing or modifying the foregoing clauses,
shall not impose any liability on the Landlord regarding the nature and validity of these policies, or the absence thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2.8. The Tenant undertakes to comply with all the terms of the policies referred to in this Section
 above, to pay the policy premiums on time, and to ensure that the policies are renewed and are fully valid throughout the Lease
 Period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3. It is agreed that with regard to the above insurances of the Leased Premises, the following provisions will apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.1. The Leased Premises insurance will include an express condition whereby it precedes any insurance procured by the Landlord if any
in connection with the Leased Premises and that the Leased Premises insurance procured by the Tenant will be activated and charged before
any other insurance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.2. The insurer of theLeased Premises will warrant that the Leased Premises' insurance policies
 will not be reduced, canceled or expired in any way, unless a registered postal notice is provided to the Landlord 60 days in
 advance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.3. The Tenant will procure the policies from a duly licensed
insurance company, update the insurance amounts, strictly comply with all policy provisions and pay the premiums on time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.4. Not later than 14 days before the end of the Leased Premises insurance period, the Tenant undertakes to
deposit with the Landlord the insurer's approval stating that the Leased Premises insurance is extended for another year, and within 30
days from the date of renewal of such insurance, the Landlord will receive the original copies of the renewed insurance policies. Furthermore,
the Tenant will continue and repeat the aforementioned process until the end of the period of the Leased Premises insurance as required
by this Section.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3.5. The Tenant agrees and confirms that it does not have and shall not have any claim and/or action against
the Landlord and/or any other third party for any damage whatsoever for which it is entitled to receive indemnification under the Leased
Premises Insurance, and it exempts all of the above from any liability towards it and/or any other third party on its behalf for such
damage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.4. Should an insurance event occur, then for any damage caused,
the Tenant will pay the deductible.

---

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**16.** <u>**Guarantees and Collateral**</u> 

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|:---|:---|
| 16.l. | The Tenant undertakes to provide the Landlord within 14 days from the Effective date, with a cash deposit by way of a bank transfer in the amount of four months' Rent and Management Fees (Hereinafter — **"the First deposit").** In January 15<sup>th</sup>, 2021 the Tenant undertakes to provide the Landlord with additional cash deposit by way of a bank transfer in the amount of two months' Rent and Management Fees plus VAT and plus a sum equal to the VAT of the First deposit. All the above deposits will remain and be valid until the end of the Lease Period. |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.2. In addition, in order to secure the Tenants obligation
according to this agreement, The Tenant undertakes to create in favor of the Landlord charges on his assets in the customary version
attached to this agreement as **Annex "F"** (Hereinafter - **"the Charges").** The charges will be created
and registered no later than the date of the beginning of the Completion works. Any delay in the registration of the Charges will cause
a similar delay in the dates relevant for the completion works.

**17.** <u>**Liability and Indemnity**</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.1. The Landlord and anyone acting in its name or on its behalf
shall not be liable, in any way, for any damage and/or expense which may be caused to the Tenant and/or anyone on its behalf and/or its
business and/or its property, including without prejudice to the generality of the foregoing, damage or injury resulting from the entry
of the Landlord or anyone acting on its behalf to the Leased Premises for one of the purposes set out in this Agreement, unless the damage
is caused as a result of a willful and/or negligent act and/or omission act of the Landlord and/or anyone acting on its behalf, towards
the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.2. For the avoidance of doubt and without prejudice to
the foregoing Section, it is clarified that Landlord, or anyone acting on its behalf, shall not bear any liability and/or any obligation
whatsoever, for any bodily injury and/or loss and/or damage to property of any kind, caused to the Tenant and/or its employees and/or
anyone on their behalf, including and without prejudice to the generality of the foregoing, to employed persons, agents, contractors,
clients, visitors and/or any other person present in the Leased Premises or other area possessed by the Tenant, except in the circumstances
set out in this Section above, unless the damage is caused as a result of a willful and/or negligent act and/or omission of the Landlord and/or anyone acting on its behalf.

---

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.3. The Tenant alone shall be liable for any loss and/or damage and/or expense incurred to the Leased
 Premises, and/or parts thereof, and/or to its contents, and/or any person and/or corporation, and/or the Landlord, and/or anyone
 acting on their behalf, and/or any third party that result from carrying on its business in the Leased Premises, and/or from its
 possession and/or from the use of the Leased Premises, and/or leasing it, and/or any negligent act or omission of the Tenant, or any
 person on its behalf. The Tenant shall not be liable for any loss and/or damage and/or expense caused as a result of the willful
 and/or negligent act and/or omission of the Landlord, and/or anyone on its behalf.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.4. The Tenant undertakes to indemnify the Landlord for any damages or expenses incurred as a result of
 a claim filed against it, civil or criminal, and for the need to defend against such claim, should such claim arise from the
 Tenant's failure to fulfill one of its obligations pursuant to this Agreement or from breach of such obligation, including any
 claim for damages or expenses that the Tenant is liable for in accordance with the provisions of this Agreement. All this provided
 the Landlord notifies the Tenant immediately upon receiving a claim filed against the Landlord as stated above, and allows the
 Tenant to defend against it, and the Tenant will indemnify it immediately upon receipt of a court judgement given on the
 matter.

**18.**  **<u>Hypothecation by the Landlord</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.1. The Landlord is entitled to take out a mortgage and/or charge
and/or assign and/or sell and/or rent and/or lease and/or transfer the Leased Premises and this Agreement, all or part thereof, and/or
its rights thereto, in whole or in part, as well as its rights in parts of the Property not included in the Leased Premises, to another
or to others, in any manner as the Landlord deems fit and in its sole and absolute discretion and without any need for the Tenant's consent,
provided that in any event such charge or sale does not derogate from the Tenant's rights pursuant to this Agreement.

---

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.2. The Tenant warrants
 that if it does not vacate the Leased Premises in accordance with that stated in this Section,
 it will pay the Landlord for each day of delay from the first day of delay in vacating the
 Leased Premises till the 30<sup>th</sup> day of delay beyond the date stipulated in this
 Agreement, rent at a rate of 200% of the Rent of the Leased Premises per day according to
 this Agreement. The Tenant affirms that this amount has been determined and agreed between
 the Parties as liquidated and agreed damages, as estimated with due consideration by the
 Parties in advance, as the reasonable damages due to non-vacation of the Leased Premises
 at the time set forth for vacating the Leased Premises (hereinafter the **"Agreed Compensation"**),
 and the Landlord will have no claims and/or demands of any kind whatsoever
against the Tenant in relation to the first 30-days of delay in vacating the Leased Premises beyond the Agreed Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.3. A delay in vacating the Leased Premises that exceeds a 31 day delay, will constitute a fundamental breach of the Agreement and
 shall entitle the Landlord to any remedies available to it for such breach, in addition to the Agreed Compensation up to the actual
 date of vacation of the Leased Premises and compensation for any damages caused to the Landlord as a result of the delay in the
 vacation of the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.4. For the avoidance of doubt, the Tenant affirms that this Section does not derogate from any right
 whatsoever of the Landlord, including and without prejudice to the generality of the foregoing, the right of the Landlord to
 exercise the collateral given to it and the right of the Landlord to sue for the fulfillment of all of the Tenant's
 liabilities pursuant to this Agreement, and no payment pursuant to this Section releases the Tenant from its obligation to vacate
 the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.5. The Tenant represents and warrants that if it does not vacate the Leased Premises as stated in this
 Section, then the Landlord shall be entitled, in addition to the remedies provided to it under the Agreement and under any law, to
 claim from the Tenant all amounts, payments, taxes, liabilities, appropriate usage fees, expenses, losses and any other payment for
 the period between the contractual date of vacating the Leased Premises and the actual date of vacating the Leased Premises, as if
 the Lease Period had continued, and all without prejudice to the Tenant's obligation to vacate the Leased Premises, provided
 that the Landlord would not be entitled to claim double compensation for the same damage, namely both the Agreed Compensation, as
 set out in Section 18.2 above, and also the compensation for damages as set out in this Section.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.6. For the avoidance of doubt, the Tenant declares that payment and/or the provision of appropriate
 usage fees and/or payments under this Section do not in any way create rental relationship between the parties for the period
 following the date of vacating the Leased Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.7. The Tenant affirms that in any event that it does not itself vacate the Leased Premises by the due
 vacation date, then the Landlord and/or anyone on its behalf shall be entitled to enter the Leased Premises, after first giving a
 15-day written notice to the Tenant, and may evict any person and property belonging to, or related to, the Tenant and/or used for
 its business in the Leased Premises, all at the sole and absolute discretion of the Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.8. The Landlord shall be entitled to execute such eviction at
any time as it deems appropriate, after giving a 15-day written notice to the Tenant. The Landlord shall be entitled to use force when
evicting, if necessary, and shall be entitled to handle the property and equipment in the Leased Premises in its absolute discretion.
The Landlord may remove such property and equipment outside the Leased Premises, and may, but does not have to, store the property and
equipment where it deems fit, in this case at its sole and absolute discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.9. Any amount expended by the Landlord in connection with the eviction of the Tenant and its
 belongings, as aforesaid, shall be to the account of the Tenant and shall be paid to the Landlord immediately upon the
 Landlord's first demand, and the Landlord's accounts in respect of the said expenses shall constitute decisive proof of
 their correctness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.10. Tenant affirms that the Landlord and/or anyone on its behalf will not be liable in any way whatsoever
for any damage of any kind whatsoever caused to the Tenant, if such damage is caused, due to any action related to the eviction of the
Tenant and/or the equipment and property from the Leased Premises and/or the storage of equipment and property due to failure to vacate
on time.

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**19.**  **<u>Final Settling of Accounts</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1. Upon expiry of the
 Lease Period or cancellation of this Agreement for any reason, the Landlord and the Tenant
 will make a final settling of accounts (in this Agreement the ()"**Final Settling of Accounts** ").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2. For the purpose of the Final Settling of Accounts, the Tenant shall present the Landlord with
 confirmations from any municipal and/or governmental and/or other body towards which the Tenant undertook in this Agreement to make
 various payments, directly or indirectly, indicating that as of the date of such confirmation, the Tenant has paid all payments in
 respect of the Lease Period, including principal and/or interest and/or linkage differentials and/or fines and/or any other debt for
 the said period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.3. A condition for the Final Settling of Accounts and/or any
payment by the Landlord thereafter is the vacation of the Leased Premises by the Tenant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.4. The Parties shall endeavour to ensure that the Final Settling
of Accounts ends no later than 90 days after the vacation of the Leased Premises.

**20.**  **<u>Parties Remedies for Breach of the Agreement</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1. The Parties affirm that nothing contained in this Agreement shall exhaust all the rights and
 remedies of the Parties in case of breach of the Agreement by either one of them, and shall not impair any right or remedy conferred
 on them by this Agreement and/or by any law, or derogate therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2. The Tenant undertakes that if it commits a breach of this Agreement, all or part thereof or any of
 its terms and conditions, and does not rectify the breach within a reasonable timeframe designated in a warning notice received from
 the Landlord, and/or if it commits a fundamental breach of the Agreement, the Landlord shall be entitled to cancel the Agreement
 with immediate effect, and the Tenant will have to vacate the Leased Premises immediately or at the time determined by the Landlord,
 if determined, without this prejudicing any right whatsoever or other remedy of the Landlord pursuant to this Agreement and/or under
 any law.

20.3. Notwithstanding the foregoing, a delay of less than 14 days
in the fulfillment of any of the Parties' obligations under this Agreement shall not constitute a breach of the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.4. The Tenant affirms that the Landlord will be entitled to cancel this Agreement if a decision is made
 (hereinafter the: "**Decision**") on the appointment of a trustee and/or liquidator and/or a receiver, temporary or
 permanent, to the Tenant, or if an order for initiating proceedings and/or a receivership order or liquidation or bankruptcy order
 is issued against the Tenant, or if a foreclosure order is given against all of the Tenant's assets which may prevent it from
 fulfilling its obligations under this Agreement, all or in part, and the Decision or order is not be canceled within 30 days of the
 date it is issued. The Tenant undertakes to cancel any such Decision within 30 days of the date it is issued, and affirms that its
 non-cancellation within 30 days shall constitute a fundamental breach of the Agreement, and the Landlord shall be entitled to any
 remedy granted to it pursuant to this Agreement and pursuant to any law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.5. The foregoing shall not derogate
from the Landlord's right to sue the Tenant for an anticipated breach and including any remedy that results therefrom.

20.6. The fundamental Sections\| of this Agreement, the breach whereof
shall constitute a fundamental breach, are: 3, 4, 6, 7, 8, 9, 10, 10.5, 12, 14, 15, 16 and 17.

**21.**  **<u>VAT</u>** 

Any payment that a Party is required to pay to the other pursuant to this Agreement and/or that derives therefrom and which is not stated as including VAT shall be accompanied by VAT (if required by law) to be paid by the Party that is required to make the said payment to the Party entitled to receive it, by deposit to its account or by way of a postdated check, at the choice of the party eligible to receive the payment, on the day before the day on which the eligible Party is required by law to transfer the VAT payment to the tax authorities with regard to the payment for which the tax payment is made.

**22.**  **<u>Business Day</u>** 

In any event that a date set for making any payment pursuant to this Agreement and/or which derives therefrom, is due on a day that is not a business day, the date for making the payment shall be postponed to the first business day after such date.

**23.**  **<u>Indemnity</u>** 

In the event that a Party to this Agreement must perform a certain action or payment pursuant to this Agreement and/or which derives therefrom (hereinafter the: "**Indemnifying Party**") and does not perform such action or make such payment in accordance with the terms and in the manner required by this Agreement and/or by any law, then the other Party (hereinafter the: "**Indemnified Party**") may (but is not required to) perform this action and/or make this payment in lieu of the Indemnifying Party, provided a written warning was given to the Indemnifying Party 30 days in advance to fulfill its obligations, and the Indemnifying Party failed to do so in this period, and if the Indemnified Party did so, then the Indemnifying Party must pay to the Indemnified Party any amount spent by the Indemnified Party in connection with such action and/or in connection with such payment, no later than 20 days after receipt of a written request from the Indemnified Party that specifies the amount of its expenses (together with supporting documents to substantiate its expenses, if any). Interest will be added to any amount not paid by the Indemnifying Party to the Indemnified Party in the period stated above, calculated on the amount in arrears from the day the Indemnified Party issued the said demand until the day the Indemnified Party is repaid in full

**24.**  **<u>Imputation of Payments</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.1. If arrears interest is added to any debt pursuant to this Agreement, then any payment paid by the
 debtor to the other party will first be credited to settling all the arrears interest that will be added as stated to the debt of
 the Paying party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.2. To the extent that any amount paid by one Party to the other
is in whole or in part, subject to VAT and the paying Party is the Party required to pay VAT in accordance with this Agreement, then
a payment made by said Party to the other Party will be calculated as including VAT, and will be credited to settling a portion of that
amount and the said tax due on that portion of the amount, which together come to the amount paid as indicated above.

---

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**25. <u>Dispute Resolution</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.1. In the event of any dispute between the Parties they shall
endeavor to resolve this in good faith negotiations. If the Parties' representatives are unable to resolve the dispute between themselves
within 15 days, then the dispute shall be referred to the general manager of the Tenant and the Chief Executive Officer of the Landlord,
who shall consider such dispute within fifteen (15) business days of such referral and shall hold
further good faith discussions to try and resolve the dispute.

25.2.  **<u>Arbitration.</u>** If the Parties are
 unable to resolve the dispute in accordance with the procedure set out in Section 25.1 then
 either one of the Parties may refer the matter to binding arbitration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.2.1. In the event that the Parties are unable to agree on the
identity of the Arbitrator, within ten (10) business days of a Party's first written request, then the Chairman of the Israel Bar
Association shall be entitled to appoint the Arbitrator.

25.2.2. The Arbitrator shall decide the dispute in accordance
with the substantive laws of the State of Israel and shall provide a reasoned decision. The Arbitrator shall not be bound by
procedural rules, or evidentiary rules.

25.2.3. This Agreement constitutes a Deed of Arbitration, within the
meaning of the Arbitration Law.

**26. <u>Entire Agreement</u>**

The provisions of this Agreement exhaust exclusively all that is agreed between the Parties regarding all the matters referred to herein and any negotiations or agreements prior to the signing of this Agreement shall not be taken into account, unless approved in a written document signed by all Parties on the date of the Agreement or thereafter.

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**27. <u>Silence and Failure to Act</u>**

It is hereby agreed between the Parties that, unless otherwise expressly stated in this Agreement, in any case whatsoever that any one of the Parties does not exercise or delays in exercising any of its rights arising from \ this Agreement or derived therefrom, this fact shall not be deemed a waiver of such rights, or as any admission, or as any precedent, both in regard to the instance in connection wherewith the Party could have exercised such right, and in regard to any subsequent instance, and such Party may exercise its rights derived from this Agreement and/or related to it and/or pursuant to the law, at any time that it deems fit.

**28. <u>Miscellaneous</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.1. The Tenant shall not be entitled to offset and/or withhold any amount that is owed to the Landlord
 in accordance with this Agreement and/or which derives therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.2. Any amendments or additions to this Agreement shall be made
in writing and signed by the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.3. This Agreement will
 be signed in English as the governing language version while the "Hebrew translation
 attached as  **<u>Annex G</u>**" hereto will assist in its interpretation.

**29. <u>Addressed and Notices</u>**

The Parties' addresses for the purposes of this Agreement are:

The Landlord: 5 Sakharov St., Rishon leZion, and by email: and by email:

The Tenant: 8 Ya'elim St. Gan Yavne, and during the Lease Period at the Leased Premises and by email:

These addresses will be used as addresses for mailing post and serving summons to the Parties, including Recihparm Israel Ltd. and Recipharm AB Any notice delivered from one Party to the other Party pursuant to this Agreement or by power thereof, shall be in writing.

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Any notice, including court documents sent by one Party to the other by courier, by mail, or by facsimile during normal business hours, shall be deemed to have arrived to its recipient upon delivery at the same address, and any message sent to the other Party by registered mail shall be deemed to have reached its recipient at the end of 7 days from the date of sending such mail, provided that the delivery of the notice in any of the above ways shall be to the above addresses

**<u>IN WITNESS WHEREOF THE PARTIES HAVE SIGNED BELOW:</u>**

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| ![](ea028360901_ex4-16img4.jpg) | ![](ea028360901_ex4-16img5.jpg) |

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**<u>Confirmation</u>**

I confirm that, **Recipharm Israel Ltd**., signed this Agreement by its authorized signatories and in accordance with a company resolution and that the above signature is binding for all intents and purposes.

![](ea028360901_ex4-16img6.jpg)

**<u>Annex C</u>**

**<u>Agreements on the Leased Premises at Shell Level</u>**

1.1. The shell space standard of the Leased Premises will be as
follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.1. Ceramic flooring – the same shade and standard as in
the entire Floor A' or its equivalent in terms of cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.2. White Mineral Acoustic Ceiling size 60 x 60 cm that meets
the fire department standards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.3. LED lighting (white lighting) 60 cm by 60 cm in quantity
reflecting the standard for offices and no less than what is on the mezzanine floor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.4. Fireproof red plaster walls that meet the fire department
standards including white tambour paint.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.5. Sprinklers for water only in accordance with the Israeli
standard and suitable for the business activity of the Tenant as to be reported by the Tenant to the Landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.6. The walls and the roof of the second floor will be made of
insulating panel (5 cm thick) by rock wool according to the fire department requirements.

1.2. To the best of our knowledge, the floor of the Leased Premises
on the first floor will support a weight of 500 kilos/square meter.

1.3. The Landlord will carry out the construction of the Leased
Premises on the first floor using materials in accordance with Israeli standards and approved by the fire department.

1.4. Should the Tenant request the use of special materials necessary
for its purposes, the Tenant will bear the difference between the price of the materials at the Tenant's request and the price of the
Materials that the Landlord would have used or as set forth in Section 1.1 but for the Tenant's request.

1.5. No additional construction will be carried out on top of
the Leased Premises on the first floor except for the construction of a solar electric installation.

1.6. The Tenant will be permitted to open fume extraction vents
in the east facade for vents (Mindafim) that will be installed in the Leased Premises, in the walls of the Building or on the roof, in
accordance with the law.

---

| | | |
|:---|:---|:---|
| ![](ea028360901_ex4-16img1.jpg) | ![](ea028360901_ex4-16img2.jpg) | ![](ea028360901_ex4-16img3.jpg) |

---

1.7. The Tenant will be able to erect a solar water heater on the roof of
the Leased Premises on the first floor, in accordance with the law.

1.8. In the event that the chosenoperating contractor is selected by the
Tenant, the Completion Works will be performed concourrently with the construction of the facade, as far as reasonably possible and acceptable

---

| | | |
|:---|:---|:---|
| ![](ea028360901_ex4-16img1.jpg) | ![](ea028360901_ex4-16img2.jpg) | ![](ea028360901_ex4-16img3.jpg) |

---

**<u>Annex D</u>**

(unofficial translation from Hebrew original)

**<u>Management Fee Agreement - Appendix "D"</u>**

**<u>to Lease Agreement dated August 11, 2020</u>**

**Arranged and signed on August 11, 2020**

Between: P.L.A.R. Asset Management Ltd. 513653535

**via [\*\*\*\*\*] ID [\*\*\*\*\*]**

5 Sakharov Street Rishon LeZion

Tel: [\*\*\*\*\*] E-mail: [\*\*\*\*\*]

Between: R. Matri, Adv. - Law Firm 513343160

**From the street: [\*\*\*\*\*]**

**Email: [\*\*\*\*\*]**

**(Hereinafter jointly and severally: the "Landlord/Management Company"), <u>On the one hand</u>;**

Between: Recipharm Israel Ltd. 515254944

8 Yeelim Street, Gan Yavne and during the rental period – in the leased premises

Tel: [\*\*\*\*\*] E-mail: [\*\*\*\*\*]

(Hereinafter: "The Tenant")

**<u>On the other hand;</u>**

---

| | |
|:---|:---|
| Whereas | and the landlord declares that it is the management company of the public areas in the land known as the 5405 Block, Plot 14 in 5 Nahal Snir Street in Yavne in the northern industrial zone of Yavne (hereinafter: "The Real Estate") and it manages all the equipment and machinery in the land that serve all the real estate and the tenants as detailed in this agreement; |

---

Whereas, and the tenant requires the services of the real estate management company;

Whereas, and the management company undertakes to manage all the equipment and machinery that serve all the real estate and the tenants as specified in this agreement;

Whereas, and it is the intention of the parties to regulate the arrangement between them;

**<u>Definitions</u>**

In this Agreement, the terms set forth below shall have the meaning appearing next to them:

---

| | |
|:---|:---|
| &nbsp;&nbsp;**The Real Estate** | &nbsp;&nbsp;known as Block 5405, Plot 14 at 5 Nahal Snir Street in Yavne, in the northern industrial zone of Yavne. |
| &nbsp;&nbsp;**The Rental Agreement** | &nbsp;&nbsp;The lease agreement regarding the leased property was signed at the same time as the signing of this agreement. |
| &nbsp;&nbsp;**Leased for the purposes of management fees** | &nbsp;&nbsp;As defined in the lease agreement.<br>All as indicated in the attached sketch **<u>in Appendix A-1 and Appendix A-2.</u>** to the lease agreement. |
| &nbsp;&nbsp;**Start date for the payment of management fees** | &nbsp;&nbsp;The date set in the lease agreement for the start of the payment of the rent. |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Indexation** | &nbsp;&nbsp;The rent will be linked to the increase in the Consumer Price Index on an annual basis in such a way that if the last index published at the time of the examination (hereinafter: **the "New Index")** is higher than the base index, then the rent for the period following the date of the examination will be increased at the rate at which the new index increased compared to the base index. If the new index is lower than the last index according to which the last rent was paid, then the rent will be paid according to the last (higher) index. The rent will be updated at the rate of increase in the index from each year of lease on the first day in October for the next 12 months of rent. |
| &nbsp;&nbsp;**The Index** | &nbsp;&nbsp;The price index, known as the Consumer Price Index, published from time to time by the Central Bureau of Statistics and Economic Research, includes the same index even if it is published by another government institution, and includes any other official index that will replace it, whether or not it is based on the same data on which the existing index is based. If there is another index that will replace it, according to the ratio determined by the Central Bureau of Statistics between the new index and the replaced index. |
| &nbsp;&nbsp;**The Basic Metric** | &nbsp;&nbsp;The index known at the time of signing this agreement, i.e., the monthly index. |
| &nbsp;&nbsp;**Management Fees** | &nbsp;&nbsp;NIS [\*\*\*\*\*] per gross square meter plus VAT and index-linked with an annual addition of 2%. |
| &nbsp;&nbsp;**Management fee period** | &nbsp;&nbsp;The rental period. |

---

**List of Appendices**

The following documents are attached to this Agreement as an integral part of it:

**<u>Appendix A</u> –** Authorization to Debit an Account (Standing Order).

**<u>Appendix B</u> –** a promissory note of the company.

**1.**  **<u>Management Company Obligations:</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;1.1. Cleaning in common areas on the land such as: garden, parking,
stairwell, yards, corridors, etc.

&nbsp;&nbsp;&nbsp;&nbsp;1.2. Service and service for the passenger elevator in the lobby
area only (not including an elevator/elevator of equipment that will be located in the front

&nbsp;&nbsp;&nbsp;&nbsp;1.3. Gardening, ongoing care on a monthly basis by a gardener.

&nbsp;&nbsp;&nbsp;&nbsp;1.4. Ongoing care and maintenance of all fire protection systems
such as: water reservoir, pumps, generators, hydrants, sprinklers in public areas, maintenance of lighting in public areas including
outdoor lighting.

&nbsp;&nbsp;&nbsp;&nbsp;1.5. Ongoing care and maintenance of the spinklers within the
leased premises are the responsibility of the landlord and at the expense of the tenant, including an annual report for fire extinguishing
purposes.

&nbsp;&nbsp;&nbsp;&nbsp;1.6. Approval of a certified inspector for all electrical systems
in the real estate that include the tenant's electrical system, by the landlord and at the expense of the tenant.

**2.**  **<u>Obligations of the Tenant:</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;2.1. The tenant undertakes to pay the management fees together
with the rent payments as detailed in the lease agreement.

&nbsp;&nbsp;&nbsp;&nbsp;2.2. The Tenant undertakes to pay the additional payments in accordance
with the provisions of this Agreement within 30 days from the date of the demand.

**3.**  **<u>General information</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;3.1. The provisions of this Agreement shall be considered an integral
part of the provisions of the Lease Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;3.2. Violation of the provisions of this Agreement shall be deemed
a breach of the provisions of the Tenancy Agreement.

**As evidence, the parties have signed below:**

---

| | | |
|:---|:---|:---|
| /s/ **P.L.A.R. Asset Management Ltd.** | /s/ **R. Matri, Adv. – Law Firm** | /s/ **Recipharm Israel Ltd.** |
| **P.L.A.R. Asset Management Ltd.** | **R. Matri, Adv. – Law Firm** | **Recipharm Israel Ltd.** |

---

**Confirmation**

I hereby confirm that the lessee Recipharm Israel Ltd. has signed this agreement through authorized signatories and in accordance with the company's decision, and that its signature is binding on it for all intents and purposes.

---

| | |
|:---|:---|
| August 12, 2020 | /s/ Jonathan Schwartz, Attorney |
| Date | Jonathan Schwartz, Attorney |

---

**<u>Annex E</u>**

(unofficial summary from Hebrew original)

**<u>Lien Document</u>**

Pursuant to a lease agreement entered into and signed on August 11, 2020 relating to premises located at 5 Nahal Snir Street, Yavne, Israel, Recipharm Israel Ltd. (the "Company") granted the landlords, P.L.A.R. Asset Management Ltd. and Adv. R. Matri Law Offices, a first-ranking floating charge over the Company's equipment and other tangible personal property (as recorded in the Company's tax depreciation fixed-asset register) as collateral to secure the Company's repayment obligations in respect of completion works financed by the landlords, consisting of repayment of the landlords' actual completion work costs (before VAT) through an additional rent component calculated as (i) the completion work costs divided by 10, plus (ii) annual interest of 12% on the unpaid balance, plus VAT, and payable in equal monthly installments over ten (10) years together with indexation and statutory VAT. If the lease terminates before full repayment, the Company is required to pay, in a single final payment upon termination, the unpaid balance of the completion work costs together with linkage differentials and statutory VAT.

## Exhibit 8.1

**Exhibit 8.1**

**Scinai Immunotherapeutics – List of Subsidiaries**

---

| | | |
|:---|:---|:---|
| **Subsidiary** | **Country of Incorporation** | **Ownership Interest** |
| **Scinai Biopharma Services Ltd.** | Israel | 100% |
| **Scinai BioServices Inc.** | Delaware (U.S.A) | 100% |
| **Scinai Immunotherapeutics Spółka z ograniczoną odpowiedzialnością** | Poland | 100% |

---

## Exhibit 12.1

**Exhibit 12.1**

**<u>CERTIFICATION</u>**

**<u>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</u>**

I, Amir Reichman, certify that:

1. I have reviewed this report on Form 20-F of Scinai Immunotherapeutics 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 registrant as of, and for, the periods presented in this report;

4. The registrant'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 Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;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 registrant, including its consolidated subsidiary, 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 registrant'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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;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 registrant's ability to record, process, summarize and report financial data; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 1, 2026

---

| | |
|:---|:---|
| By: | /s/ Amir Reichman |
| Name: | Amir Reichman |
| Title: | Chief Executive Officer |
|  | (Principal Executive Officer) |

---

## Exhibit 12.2

**Exhibit 12.2**

**<u>CERTIFICATION</u>**

**<u>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</u>**

I, Uri Ben-Or, certify that:

1. I have reviewed this report on Form 20-F of Scinai Immunotherapeutics 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 registrant as of, and for, the periods presented in this report;

4. The registrant'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 Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;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 registrant, including its consolidated subsidiary, 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 registrant'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 registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;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 registrant's ability to record, process, summarize and report financial data; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 1, 2026

---

| | |
|:---|:---|
| By: | /s/ Uri Ben-Or |
|  | Uri Ben-Or |
|  | Chief Financial Officer |
|  | (Principal Financial Officer) |

---

## Exhibit 13.1

**Exhibit 13.1**

**Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

**(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)**

In connection with the Annual Report on Form 20-F of Scinai Immunotherapeutics Ltd. (the "<u>Company</u>") for the period ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "<u>Report</u>"), Amir Reichman, Chief Executive Officer, of Scinai Immunotherapeutics Ltd., an Israel corporation, do hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&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.

---

| | |
|:---|:---|
| Dated: April 1, 2026 | /s/ Amir Reichman |
|  | Amir Reichman |
|  | Chief Executive Officer<br> (Principal Executive Officer) |

---

## Exhibit 13.2

**Exhibit 13.2**

**Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

**(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)**

In connection with the Annual Report on Form 20-F of Scinai Immunotherapeutics Ltd. (the "<u>Company</u>") for the period ended December 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "<u>Report</u>"), Uri Ben-Or, Chief Financial Officer, of Scinai Immunotherapeutics Ltd., an Israel corporation, do hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&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.

---

| | |
|:---|:---|
| Dated: April 1, 2026 | /s/ Uri Ben-Or |
|  | Uri Ben-Or |
|  | Chief Financial Officer<br> (Principal Financial Officer) |

---

## Exhibit 15.1

**Exhibit 15.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 333-291460, 333-271293 and 333-239344) and Forms F-3 (Nos. 333-274078 and 333-276767) of our report dated March 31, 2026, relating to the consolidated financial statements of Scinai Immunotherapeutics LTD (the "Company"), appearing in the Company's Annual Report on Form 20-F for the year ended December 31, 2025.

---

| |
|:---|
| /s/ Ziv Haft |
| Ziv Haft |
| Certified Public Accountants (Isr.) |
| BDO Member Firm |
| Tel Aviv, Israel |
| March 31, 2026 |

---